Simplify Your Taxes: Essential Work from Home Deductions for 2023-24

In today’s dynamic work environment, many employees find themselves working from the comfort of their homes. While this shift brings about convenience, it also presents an opportunity to claim various tax deductions that can significantly reduce your taxable income. At Aero Accounting Group, we’re here to help you navigate these deductions with confidence and ease.

Understanding Work from Home Tax Deductions

When you work from home, you’re likely using resources such as your phone, internet, and electricity more frequently. These extra costs, known as work from home tax deductions, can be claimed on your tax return, provided you meet certain criteria. Here’s a breakdown of what you need to know:

1. Eligibility Criteria:

• You must work from home regularly to fulfill your employment duties.

• You should incur additional expenses due to working from home.

• Keep adequate records that outline the hours worked and expenses incurred.

2. What are Home Office Expenses? 

Home office expenses are the extra costs you pay because of working from home rather than at your employer’s workplace. These include:

• Electricity and gas

• Home and mobile phone expenses

• Internet or data expenses

• Computer consumables and stationery

• Office equipment and computers

Methods for Claiming Deductions

There are two primary methods to claim your home office expenses:

1. Fixed Rate Method:

You can claim a fixed rate of 67 cents per hour worked from home. This rate covers energy costs, phone and internet usage, and office consumables.

• For items like office equipment that cost $300 or less, you can claim an immediate deduction. For items over $300, you’ll need to depreciate them over time.

Ensure you keep an accurate record of actual hours worked from home using timesheets, rosters, employer logs, or a regularly updated calendar.

2.Actual Cost Method:

• This method allows you to claim the actual work-related portion of the extra expenses you’ve incurred.

• You need to maintain detailed records of all expenses, including receipts, bills, and a log of hours worked from home.

• This method might be more beneficial if your actual costs exceed the amount calculated using the fixed rate method.

Example Calculations

Fixed Rate Method Example:

Sam works from home three days a week as a graphic designer. Over the course of the year, he calculates that he worked from home for 720 hours. Using the fixed rate method,  Sam can claim: 

720 hours×$0.67=$482.40

 This amount covers his electricity, internet, and other home office expenses.

Actual Cost Method Example:

Emily is a marketing consultant who works from home five days a week. She keeps detailed records of her home office expenses, which include $600 for electricity, $480 for internet, and $300 for mobile phone usage. She calculates that 60% of her internet and mobile phone usage is work-related. Emily’s deductible expenses using the actual cost method are:

• Electricity: $600×100%=$600

• Internet: $480×60%=$288

• Mobile Phone: $300×60%=$180

Total claim using the actual cost method: $600+$288+$180=$1,068

Keeping Good Records

Accurate record-keeping is crucial for substantiating your claims. Depending on the method you choose, ensure you have:

• A record of the total number of hours worked from home.

• Receipts and bills for all expenses.

• Documentation showing how you calculate your deductions.

Navigating the complexities of work from home tax deductions can be challenging, but you don’t have to do it alone. At Aero Accounting Group, we specialize in making tax and accounting services simple and easy, tailored to your unique needs.

Let us help you maximise your deductions and optimise your financial well-being.

Contact Aero Accounting Group today for a consultation and take the first step towards a stress-free tax season.