Dear Lifehacker, As a telecommuter, I work from home during standard business hours. I'm aware that I can claim part of my expenditure on tax, but what portion is appropriate?
Working from home requires me to sign into a VPN during work hours. I'm generally utilising the internet for checking emails, using web portals and communicating with co-workers using other services such as Lync. The internet connection being used is my pre-existing personal plan (ADSL2+, 200GB per month).
The question is, how do I quantify my internet usage? If it is by data (downloads and uploads) then it is probably only 5 per cent (if that) of my overall usage. If it is calculated by time then it is 40 hours out of 168 hours per week (approximately 25 per cent).
I have been told to keep a diary to help in case of being audited but I still do not know what I should be basing my work usage on -- time or data? Any thoughts? Thanks, Taxed Telecommuter
Working from home picture from Shutterstock
So questions about tax deductions for Internet use are all the rage around Lifehacker HQ right now. As with any tax issue, if you require specific advice you should consultant an accountant or other qualified professional. However, you have identified the core issue: you need to claim a proportion of the related expense.
In this case, I'd suggest that time-based diaries are the way to go. While it's true that what you pay is partially determined by your download allowance, it is primarily time-based: you pay monthly for a given level of service. It's also the case that a fair proportion of any ISP bill is merely to have the service available.
The basis of calculation you have used seems fair, and indeed errs sensibly on the side of caution by including all the hours that your connection is switched on. If you had calculated based on the hours you were awake and using the Internet for non-work purposes, the proportion would be higher, but conservatism here seems wise.
While you're not likely to attract any audit dramas by claiming just 25 per cent of your bill against your income backed by a diary of your work hours, I'd still suggest seeing a professional would be worthwhile. Since you're working from home full-time, there are also other expenses you could potentially claim (electricity and phone usage, and a proportion of your rent if you're renting). Under those circumstances, working through a tax professional will ensure you can legitimately claim the allowed range of deductions without going overboard, and the cost of using them may well be offset by a reduced tax bill.
One final point: I'm presuming that your employer isn't paying for all or part of your internet bill directly. If they are, then you can't claim that against tax (and you'll already be better off financially).
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