Working From Home Tax Deductions in NZ: What You Can Claim

Working from home has become the norm for many New Zealanders, whether you are a business owner running your company from a home office, a contractor, or a self-employed professional. If you use part of your home for business purposes, you are entitled to claim a proportion of your household expenses as a tax deduction. But the rules around what you can claim, how to calculate the proportion, and what records you need to keep are more nuanced than most people realise.

Who Can Claim Working From Home Expenses?

You can claim working from home expenses if you are self-employed, a sole trader, a shareholder-employee of your own company, or a contractor who is not reimbursed by a client. If you are a regular employee working from home, you generally cannot claim these expenses directly. Your employer can reimburse you tax-free under IRD's guidelines, but you cannot claim them as a personal deduction on your tax return.

The key requirement is that part of your home is used regularly and exclusively (or primarily) for business purposes. Occasionally checking emails at the kitchen table does not qualify. You need a defined workspace, ideally a dedicated room, though a consistently used section of a room can also qualify.

What Expenses Can You Claim?

The expenses you can claim fall into two categories: those that relate to the whole property (apportioned by your business-use percentage) and those that relate specifically to your workspace.

Whole-Property Expenses (Apportioned)

• ●Rent (if you rent your home)
• ●Mortgage interest (subject to the interest limitation rules for property-related claims)
• ●Rates (council rates and water rates)
• ●House insurance
• ●Electricity and gas
• ●General repairs and maintenance to the property
• ●Internet (the business-use portion)
• ●Phone line rental (if you have a landline used for business)

Workspace-Specific Expenses (100% Deductible)

• ●Office furniture (desk, chair, shelving), which may need to be depreciated if over $1,000
• ●Computer equipment and peripherals
• ●Office supplies (stationery, printer ink, paper)
• ●Specific repairs or maintenance to your office space
• ●Business software subscriptions used exclusively for work

How to Calculate Your Business-Use Percentage

There are two main methods for calculating the proportion of household expenses you can claim: the floor-area method and IRD's square-metre rate method.

Method 1: Floor-Area (Actual Cost) Method

Measure the floor area of your dedicated workspace and divide it by the total floor area of your home. For example, if your office is 12 square metres and your home is 120 square metres, your business-use percentage is 10%. You then claim 10% of each whole-property expense listed above. If you do not use the space for business full-time (for example, you work from home three days per week), you should further adjust by the proportion of time the space is used for business.

Method 2: IRD Square-Metre Rate Method

IRD provides a simplified rate per square metre of workspace area. For the 2025–2026 income year, the rate is $55.00 per square metre per year (check IRD's website for the current rate, as it is updated periodically). You multiply this rate by the area of your workspace. Using the example above: 12 square metres x $55.00 = $660 per year. This method is simpler but often produces a lower deduction than the actual cost method, particularly if you have high rent or mortgage interest payments.

“In our experience, the actual cost method produces a higher deduction in about 80% of cases, but it requires you to keep receipts and records for all household expenses. Choose the method that gives you the best result while being realistic about your record-keeping discipline.”

Dedicated Workspace vs Shared Space

If your workspace is a dedicated room used exclusively for business, the calculation is straightforward: you claim the full proportion based on floor area (adjusted for time if you do not work from home every day). If your workspace is a shared space (for example, a desk in the corner of a living room), you need to make a reasonable adjustment for the personal use of that space. IRD expects you to be honest about this. Claiming 100% business use for a room that doubles as a spare bedroom is not going to withstand scrutiny.

Equipment and Depreciation

Equipment purchased for business use can be claimed as an expense. Items costing $1,000 or less (GST exclusive) can be fully expensed in the year of purchase. Items costing more than $1,000 must be depreciated over their useful life. Common depreciation rates include: computers and laptops at 50% diminishing value (or 40% straight line), office furniture at 10%–20% diminishing value, and phones at 67% diminishing value.

If an item is used partly for personal purposes (for example, a laptop used 70% for business and 30% for personal), you can only claim the business-use portion. Keep a log of your usage if you think IRD might question the split.

Internet and Phone

Internet is one of the most commonly claimed working-from-home expenses. If you have a home internet plan and use it partly for business, you can claim the business-use portion. IRD accepts a reasonable estimate. For example, if you work from home five days a week and your household uses the internet seven days a week, a business-use estimate of 50%–70% is generally considered reasonable (depending on your household circumstances). Keep a record of how you arrived at your estimate.

Mobile phone plans are similar. If you use a personal mobile partly for business, estimate the business-use proportion and claim that portion of the monthly cost. Alternatively, having a separate business phone line or plan makes the claim simpler and more defensible.

Common Mistakes to Avoid

• ●Not claiming anything. Many self-employed people leave thousands of dollars on the table because they assume working from home expenses are too small to bother with
• ●Overclaiming: claiming 100% of internet or phone when you have a family who also uses them is a red flag for IRD
• ●Not keeping records. You need receipts, measurements, and a reasonable basis for your calculations. 'I just estimated' is not sufficient if you are audited
• ●Claiming mortgage principal repayments. Only the interest portion is potentially deductible, not the principal
• ●Forgetting to adjust for time. If you only work from home two days a week, your deduction should reflect that, not the full five-day week
• ●Not reviewing your deduction annually. Utility costs change, your workspace might change, and IRD rates update periodically

What Records to Keep

Keep copies of all household bills (rent, rates, insurance, utilities), your workspace measurements and total home measurements, a record of how you calculated your business-use percentage, receipts for any equipment or supplies purchased for your workspace, and notes on your working-from-home pattern (days per week, hours per day). IRD can request these records for up to seven years, so store them securely. Digital copies are fine.