Working From Home Tax: What You Can And Can’t Claim

Working from home has its perks—you get to avoid the hassle of daily traffic and work in your pyjamas. But you should also take note of some of the expenses that incur from working from home to file for a tax deduction claim.

Tax deductions are important for work-from-home workers because they can help reduce the amount of taxable income. Remote workers can deduct a portion of the expenses incurred to make a conducive working space at home while saving money,” says tax specialist and small business loan provider Shane Perry of Max Funding. 

In this article, we’ll walk through some tips for maximising your tax deductions and saving money on your taxes as a work-from-home professional.

Who Are Eligible For Tax Deductions?

Budgeting and finance experts will tell you that as long as you are working from home, you can claim all the necessary expenses incurred to make it a conducive workspace. This includes software, printers, dedicated office space in your house or apartment, internet bills, and so on.

You can also write off the costs of day-to-day operating  expenses such as postage, courier services, stationery supplies, and documents. Similarly, you can deduct the costs of travel to meetings or conferences if you are a freelance consultant or independent contractor.

Keep in mind that these expenses must be related to your income-earning activities—that means you cannot claim for personal items (such as clothing) or items that are used for both business and personal reasons.

To maximise your tax deductions as a work-from-home professional, you should keep detailed records of all expenses incurred throughout the year and consult with an accountant or tax professional to determine which expenses can be claimed.

To claim a tax deduction, you would have to meet some of the criteria, which include:

  • Working from home to accomplish obligations related to your job.
  • Accumulation of additional expenses associated with working from home.

What Are The Costs You Can Claim?

Working from home can be a great way to save money because it helps avoid the daily cost of going to the office. But what about the additional expenses when you start working from home?

If you work from home, plenty of additional expenses jack up your bills and incur non-household-related costs like electricity, internet bills, and more. Fortunately, the Australian Taxation Office (ATO) included typical work-from-home expenses for tax deductions.

These expenses include:

  • Electricity bill
  • Work-related phone fees and internet expenses
  • Cost of office equipment that the employer does not provide
  • A decline in the value of home office furniture and furnishings
  • Running expenses like stationery and printer ink

What Are The Expenses You Can’t Claim?

According to the Australian Taxation Office, there are certain expenses that you cannot claim as a work-from-home professional. These include:

  • Expenses for personal use of your home office, such as utility bills and rent
  • Meals and entertainment costs related to business activities
  • Costs incurred from conducting your job in a public space (such as coffee shops or libraries)
  • Personal expenses such as clothing or grooming

In addition to considering these eligible and ineligible expenses, you should also consult with a tax professional or accountant to ensure that your tax deductions are correctly claimed. This will help maximise your savings and keep more money in your pocket throughout the year.

Tax deductions only apply to work-related expenses necessary to make your home a conducive working environment.

Moreover, occupancy expenses like mortgage interest, rent, property taxes, and house insurance premiums are also excluded from the claim. However, there are certain circumstances where you can file a claim for occupancy expense: if the property is solely used for work purposes alone or if there is no alternative place to work.

What Are The Different Methods To Calculate Tax Deductions?

ATO offers three methods of calculation that you can follow: the shortcut method, fixed-rate method, and actual cost method. These calculations vary depending on your circumstances, and you can calculate your tax deductions through their home office calculator.

However, it can still be confusing if you’re new to computing taxes, even if you’re consistently keeping records of your expenses. That’s why it is crucial to reach out to experts to get the most out of your work-from-home experience.

Maximise Tax Deductions And Save Money Today!

Taxes are a big part of your income as a remote worker, so you must know how to handle them properly.

By following the criteria set by ATO, as well as consulting with a tax professional or accountant, you can maximise your tax deductions and get more value from your work-from-home experience. Along with keeping detailed records of all expenses, this approach can help you save money and keep more in your pocket throughout the year.