Home Office Claims for business owners

If you are a business owner and work from home, you may be able to claim a portion of your house costs as a business expense! This article will let you know a bit about the types of things you can include in your home office claim along with how we calculate this for you.

Step One: Home Office Size

We first have to work out the size of your home office space, to know what portion of your home costs can be claimed! The spaces claimed must be solely used for business use.

The company needs to be able to prove that there is a link between the money paid for the use of your home and the income the company makes. It also needs to keep accurate records that show how and when it paid for the use of your home, the amounts paid, and how it arrived at the amount to pay.

Spaces you may consider claiming include space where you have an office, or work from as part of your business. This may also include spaces used for storage of business assets (ie stock, tools, business vehicles etc.).

This needs to be worked out in square metres, here’s an example of how you can calculate this.

You use the spare room as your office space; it’s a 3m x 4m room. You also use half of your garage for storing tools and your business vehicle - that’s 8m x 2.5m.

3 x 4 = 12sqm, plus 8 x 2.5 = 20sqm - therefore total square metres for business use is 32sqm

We also need to know the total square metres of your home, including garage and storage spaces.

Say the home is 200sqm all up - 32 / 200 = 16% of the home is for business use.

Step Two: Option One, add up your actual home costs

We then need to add up all the home costs to claim a portion of them. Here’s a list of some of the costs we typically claim

• Rent or mortgage interest*

• Electricity & Gas

• Home and/or contents Insurance

• Rates

• Repairs or Maintenance Costs

• Home Phone Costs

• Internet Costs

*it’s important that when working out mortgage interest, you exclude any principal loan repayments from this amount.

The above costs can be added up, and your home office percentage can be applied to these costs.

Step Two: Option Two, use the IRD square metre rate

Instead of working out how much of your household expenses will be claimed by your business, you can use the square metre rate option. The IRD set a rate each year that can be used for this calculation.

The rate does not include mortgage interest, rates or rent so you can also claim a portion of these costs based on floor area used for your business.

The equation for the square metre rate option is: (a x b) + (c x d)

Where:

• a is the total amount of mortgage interest, rates and rent you have paid during the year

• b is the area calculated by c divided by the total floor area of your home

• c is the total area (in square metres) of your home that is separately identifiable and used primarily for the business

• d is the square metre rate that is published by Inland Revenue.

For the 2022/2023 year, the IRD square metre rate is $51.05.

Disclaimer: this is general information only. Please reach out to Prosper Business for specific advice to your situation.