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Deduction on home-office expenses

The Law does not define this; you need to look at the nexus with income. If the expense is directly related to the production of income, then may be yes. The taxpayer who uses his or her home partly in furtherance of the conduct of a business may be entitled to a deduction in relation to only that work-related part of the house. Expenses that taxpayer can claim could be water, rates, power, insurance, interest on mortgage, phone, furniture, equipment, carpet, repairs and maintenance. The business portion is calculated based on:

Area used for work-related activities / Total are of the home.


For phone-related expenses, the business portion is calculated based on the ratio of:

Business usage / Total usage


However, taxpayer who works as an employee and earns wages and salaries is not allowed to claim home office expenses deduction. According to section DA 2 (4) of ITA 07 employment limitation, a person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving income from employment. Thus, employment limitation applies to this case and denies deductions.


Disclaimer: The following answer necessarily sets out general principles only. The facts of particular cases always need to be considered carefully, and it may be necessary to obtain advice from a tax expert.

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