Home office guide: Benefits & expenses

With remote work now widespread across the globe, a growing number of employees, contractors and small business owners are setting up designated workspaces at home. Home offices not only offer convenience and flexibility, but they can also come with tax benefits in the form of deductible expenses.

Here’s everything you need to know about home offices, from what they are, how they work, and benefits, to tips for setting one up, and common home office write-offs you can claim at tax time.

What is a home office?

A home office is a space in a residential home designated to be used for business purposes. This can be a dedicated room with a traditional office workspace, or an area such as a garage that’s set up to be used for business. 

Home offices are common among people who work from home, either part-time or full-time, as well as small business owners who don’t have the need (or budget) for a separate office space.

The growing popularity of the home office

With the costs of office rent and commuting on the rise, many employees and small businesses are choosing to set up home office space rather than take on the expense of a separate workspace. High-speed internet connectivity and the growing popularity of telecommuting have made working from home a practical option for workers and businesses around the globe.

One global survey found that 16% of companies are fully remote, while 92% of people expect to work from home at least one day a week post-pandemic, and 80% expect to work from home at least three days a week. In addition, those surveyed said they saved on average nearly $500 dollars a month – or $6,000 a year – by working from home. Given the cost and time savings of working from home, it’s no surprise that the home office is becoming a staple for many small businesses and professionals worldwide.

Benefits of a home office

A home office comes with several benefits compared to a traditional office:

• Time and cost savings: As we’ve covered, working from a home office not only saves money but also time, which would otherwise be spent commuting.
• Flexibility: With a home office, you can create a workspace that’s right for your needs rather than having to conform to a space that may be shared with other people or businesses.
• Tax benefits: When you run a home office, you can usually claim related expenses to reduce your taxable income and potentially lower your tax bill.
• Increased productivity: Fewer distractions and the flexibility to work when and how you want can boost focus and productivity.

Best practices for setting up a home office

Planning to set up a home office? Here are some best-practice tips: 

Make a list of everything you’ll need 

Before getting started, take inventory of all the equipment and items you’ll need for your home office, such as a desk and chair, filing cabinet/storage, stationery, printer and other essentials. Measure your space to figure out how much room you have to work with when buying your office furniture.

Choose a space that's free from distractions

This is sometimes easier said than done, but try to find a space that’s quiet with as little foot traffic as possible so you can stay focused while you’re working. Also aim to separate your workspace from your personal space so you can have a healthy boundary between the two.

Don’t skimp on ergonomics

While it might be tempting to buy the cheapest office desk or chair, don’t forget this is somewhere you could be sitting for eight or more hours a day – so it pays to choose furniture that’s comfortable and supportive.

Keep these ergonomic tips in mind:

• Your spine should be in a neutral position
• The top of your screen should be at or slightly below eye level
• The monitor should be at least 20 inches from your eyes
• Tilt the monitor back by 10 to 20 degrees to make you’re looking down on the screen at a slight angle

Home office deductions

Whether you run a small business from home or work from home some or all of the time, you may be able to claim tax deductions for home-based business expenses. 

Some of the most common home office deductions include:

• Home office equipment, such as computers, printers, phones and home office furniture
• Utilities, including phone, internet, electricity and gas
• Cleaning costs
• Repair costs, such as the cost of repairs to home office furniture
• General home office costs, including stationery, paper and ink
• Occupancy expenses, such as rent, mortgage interest, property insurance, land taxes and rates

Generally speaking, you can only claim the portion of an expense that is used for your business. For example, if you buy a computer and only use it for your business, you can claim a deduction for the full purchase price. However, if you use the computer 70% of the time for your business and 30% of the time for personal use, you can only claim 70% of the amount as a deduction. 

Keep in mind that deductible home office expenses and methods for calculating deductions vary from country to country, so it’s best to check with your local tax authority or a tax accountant to find out what you can claim.

QuickBooks’ expense management software makes it simple to capture and track all your expenses in one place, so you can maximise your home office deductions come tax season.