Last year we wrote this blog post that talks about working from home. As entrepreneurs, there are a lot of us that do indeed work from home and this might be something that will shed some light on what expenses you can claim!
A lot of business owners run their businesses or let employees work out of their homes to save on overhead costs. However, home office expenses needed to be reported correctly as this is a heavily audited area by CRA. Below are rules that need to be followed when claiming this deduction.
Individuals are allowed to claim home office expenses provided either you do your work there more than 50% of the time or you use the workspace only to earn your employment income. You must use the space for client or customer meetings on a regular basis in the course of your employment duties.
As well, the deduction is calculated by taking the square footage of your home office divided by the total square footage of the finished portion of your home. For example, if your home office is 100 square feet and your home’s total square footage is 2000 square feet then you can claim 5% of your eligible home expenses. You cannot claim more than your employment or business income. Any left-over expenses are carried forward to the next tax year.
| Employed | |||
| Self-Employed | Commission | Employment Income | |
| Heat | Yes | Yes | Yes |
| Electricity | Yes | Yes | Yes |
| Water | Yes | Yes | Yes |
| Maintenance | Yes | Yes | Yes |
| Rent | Yes | Yes | Yes |
| Property tax | Yes | Yes | No |
| Insurance | Yes | Yes | No |
| Mortgage interest | Yes | No | No |
To note, maintenance expenses are only applicable to the work-space itself.