Working remotely – for all its pearls and pitfalls – is quickly becoming the norm in the business world as the pandemic has forced employees to vacate offices and migrate to the digital realm. Although several countries are starting to reopen workplaces (including the United States), many employees want to continue working from home due to the improved quality of life it affords.
However, these exciting developments come with many unforeseen costs and increased expenses, and thousands of employees have been left wondering whether they’ll need to cover these themselves or if the government is prepared to help them out. But first…
Working from home expenses: what can you claim for?
The most obvious cost that people are interested in claiming for is any equipment bought specifically for work. This ranges from small work expenses like stationery and books, to larger investments like desktop computers and software. When it comes to making claims, the key is to identify things that are required for you to perform your job – not luxury items that make you more comfortable.
Heating, electricity and water bills can also potentially fall under home office deduction. However, it’s important to remember that you should only claim for costs to the extent that they’ve increased since you started working from home. Accountants will also be keen to check whether or not your work equipment is actually likely to affect these bills, as large or specialist equipment may reasonably incur greater costs.
What do we mean by ‘reasonable’?
Home office tax claims can usually be decided by one question – are they reasonable? Tax authorities have standards that need to be met before claims are processed and approved, and they’re likely to ask questions like: Do you work from home by choice or requirement? Is the computer used exclusively for work? How many adults and children are living inside the property? These (and more questions) will test the legitimacy of your expense claims, so before recording anything as a deductible, ask yourself: ‘am I being reasonable?’.
The proof is in the pudding:
If you deem your claims to be fair and reasonable, the next step is to collect the necessary evidence to strengthen your case. Evidence could come in the form of receipts, bills or even invoices from your employer. The more detailed these documents are, the better chance you stand of having your claim approved. Be careful of making unnecessary claims, however, as home office tax claims can return to bite you in the backside later down the line. For example, when selling your home, your capital tax gains break will be reduced if you’ve previously claimed a room was used ‘exclusively’ for work.
Is it worth it?
We aren’t all cut out to be chartered accountants, and frankly, there are few subjects in the world as tiresome as taxation laws. However, it’s worth going through these steps (or finding assistance from a third party) to ensure you never have to pay extra for the fact of remote business model. Just remember to ask yourselves these two simple questions before making any claims: I) Am I being reasonable? II) Can I prove it?