A tax deduction can be claimed for the share of the area of your home used by flatmates.
The income you derive is, of course, taxable. There are two components of the area used by flatmates:
Inland Revenue considers you should treat the common area as 50 percent rented and 50 percent for your own use. It doesn’t matter how many flatmates you have. The IRD does not give any rational for this method of apportionment. It is arguable, based on case law, that the common area should be apportioned based on the number of occupants eg if it’s you with 3 flatmates that would mean 75% of the common areas would be claimable. This basis gives a better reflection of how the expenses relate to you and the flatmates however be aware IRD will want to cling to their view so taking a different position could mean a dispute.
If you have interest to claim and a loss, you can only claim the interest and the loss against other income, such as salaries or wages, provided the home is considered your “main home” ie predominately used by you. This is a different calculation. IRD have stated you can treat the common area as 100 percent available to you. For example: You have two flatmates. You have 25 percent of the area of the house exclusively for yourself and they have a total of 40 percent exclusively for them. This leaves 35 percent common area. For the purposes of being able to claim a loss you occupy 60 percent (your 25% +35%) of the home and therefore can make the claim.
