Tax tips, accounting, home office deduction, bookkeeping, small business, nudge accounting, startupsMost if not all small business owners understandably say they work from home and want to claim home office deductions. So with this being the case, we have covered off some of the areas where small business owner may be able to claim a tax deduction for occupancy and/or running expenses.

  • Occupancy expenses are expenses incurred in keeping or maintaining the premises and includes things like; rent, mortgage interest, rates, land taxes and house insurance premiums.
  • Running expenses as those incurred in running the small business like; phone rental and business calls, internet fees, depreciation of office furniture and equipment and any additional heating, cooling, lighting and cleaning expenses.

First thing to make sure of is whether or not the home is a place of business and if an area has been set aside exclusively for business activities. If the home is a place of business and an area has been set aside exclusively for business activities, then a portion of both running and occupancy expenses can be claimed as a home office deduction.

Unfortunately if someone just does some work at home but have a business premises somewhere else as well, they cannot claim a deduction for Occupancy expenses.

The downside of claiming occupancy costs means that if the home owner ends up selling their home, they may need to pay capital gains tax upon sale on the portion that was business related. This really needs to be considered when claiming a deduction for Occupancy Costs.

Also a small business owner who derives Personal Services Income cannot claim Occupancy Costs.

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