Home Office Expenses

You qualify for “in-home” office deductions for your self-employed business if you meet one the following tests:

1. the home office is your principal place of business; or
2. the home office is used exclusively for business purposes and is used on a regular and continuous basis for meeting clients, customers, or patients.

A proportionate share of expenses relating to the home office (normally based on the size of the office as a percentage of the total home) including rent, repairs and maintenance, insurance, property taxes, mortgage interest, heat, and light, are eligible for deduction if you qualify. You cannot deduct any mortgage principal payments. You may claim depreciation (called capital cost allowance for tax purposes) but doing so could affect the status of your home for the principal residence exemption. The total home office expense deduction cannot exceed your business income before the deduction, but the excess may be carried forward and deducted against such income of the following year.

For employees and commissioned sales persons, similar tests apply, and “work-space in the home expenses” are allowed up to the amount of income from the employment or business for which the office is used. A Form T2200 Declaration of Employment Conditions is required to be completed and signed by your employer. Employees may claim only proportionate rent, heat, light, water, and maintenance costs. Commissioned salespersons may claim proportionate insurance and property taxes as well. Expenses in excess of the related income may be carried forward and deducted against such income of the following year.

Should you have any questions on your ability to claim home office expenses, contact a Chartered Accountant.