If you run your business from home, you’re sitting on one of the simplest tax savings most business owners miss. Claiming your home office expenses correctly can reduce your taxable income, which means you keep more of what you earn.
The best part? It’s completely legitimate and encouraged by Inland Revenue. The key is knowing how to do it right.
Too many business owners either don’t claim enough and overpay tax or claim too much and risk an IRD review. The goal isn’t to push the boundaries. It’s to claim fairly and confidently with the right method, records, and understanding.
What Is a Home Office Claim?
If you use part of your home for business, you can claim a portion of your household costs as a business expense. You’re essentially being reimbursed for using your own space and utilities to run your business.
This can include a share of costs like rent or mortgage interest, rates, insurance, power, internet, and even depreciation on office furniture and equipment.
The claim is based on business use, meaning how much of your home (and time) is genuinely used for work. The rest is private and can’t be claimed.
Why It Matters?
Every dollar you claim as an expense reduces your profit, and your tax is calculated on that profit. When your profit goes down, your tax bill does too.
For small businesses, these savings can easily add up to hundreds or even thousands of dollars each year. It’s one of the simplest ways to improve your after-tax income without changing anything in your business.
How to Calculate It?
There are two main ways to work out your claim.
1. Actual Cost Method (the detailed way)
Work out what %age of your home is used for business. For example, if your home office is 15 square metres and your house is 150 square metres, that’s 10%.
If that room is used for business 80 % of the time, your total business use is 8 %.
You can then claim 8 % of your eligible household costs.
Include expenses like:
Rent or mortgage interest
Rates and home insurance
Power and gas
Internet and phone (apportioned for business use)
Keep receipts and a clear record of how you’ve worked it out.
2. Square Metre Rate Method (the simplified way)
Inland Revenue sets a flat rate each year for utilities such as power and internet. You multiply this rate by the number of square metres used for business, then separately claim a portion of rent or mortgage interest.
This method is quick, easy, and accepted by IRD, but you can’t mix and match it with other deductions. You choose one method per year.
Common It Depends Questions
Do I need a separate room? No. You just need a clearly defined business area. Even a desk setup in your living room can count if it’s used mainly for business.
Can I claim if I rent? Yes. Rent replaces mortgage interest for the purposes of your claim.
Can I claim depreciation? Yes, on your office furniture and equipment, but not on the house itself.
What if I’m GST-registered? You claim the GST-exclusive amount of your expenses. If you’re not registered, claim the GST-inclusive amount.
What about shared spaces or part-time use? Apportion it. The rule of thumb is to be fair, be reasonable, and be consistent.
Summary
The goal isn’t to stretch the claim. It’s to make sure you don’t miss out. A well-supported home office claim is one of the easiest ways to reduce your tax bill, and it’s perfectly legitimate when done correctly.
It’s about keeping your money working for you, not the IRD.
How we can help you?
If you’re unsure which method suits you best or want help calculating your claim, talk to us. We’ll help you set it up properly, ensure your records are IRD-ready, and make sure you’re getting every deduction you’re entitled to.
Contact Us
Contact us today to discuss on 07 827 9130 or email us. Our office is in Cambridge, NZ, but distance is no problem. We have many international and national clients.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
