You can deduct expenses for the business use of a workspace in your home, as long as you meet one of the following conditions:
- it is your principal place of business
- you use the space only to earn your business income, and you use it on a regular and ongoing basis to meet your clients, customers, or patients
You can deduct part of your maintenance costs such as heating, home insurance, electricity, and cleaning materials. You can also deduct part of your property taxes, mortgage interest and capital cost allowance(CCA). To calculate the part you can deduct, use a reasonable basis, such as the area of the workspace divided by the total area of your home.
If you use part of your home for both your business and personal living, calculate how many hours in the day you use the rooms for your business, and then divide that amount by 24hours. Multiply the result by the business part of your total home expenses. This will give you the household cost you can deduct. If you run the business for only part of the week or year, reduce your claim accordingly.
For more information, go to Income Tax Folio S4-F2-C2, Business Use of Home Expenses.
The capital gain and recapture rules will apply if you deduct CCA on the business use part of your home and you later sell your home.
If you rent your home, you can deduct the part of the rent and any expenses you incur that relate to the workspace.
The amount you can deduct for business-use-of-home expenses cannot be more than your net income from the business before you deduct these expenses. In other words, you cannot use these expenses to increase or create a business loss.
You can deduct the lesser of the following amounts:
- any amount you carried forward from the previous year, plus the business-use-of-home expenses you incur in the current year
- the amount of net income(loss) after adjustments
In your next fiscal period, you can use any expense you could not deduct in the current year, as long as you meet one of the twoprevious conditions. You also use the same rules.
To help calculate your business-use-of-home expenses, complete the "Calculation of business-use-of-home expenses" on FormT2125, Part7. For an example of the calculation of these expenses, go to Calculating business-use-of-home expenses. The expenses you claim cannot have been claimed elsewhere on FormT2125.
FAQs
Home office.
For example, if your home is 2,000 square meters and your office is 400 square meters, your office is 20% of your home's total size. That means you can deduct 20% of your home office-related expenses on your tax return.
What qualifies as business use of home expenses? ›
Deductible expenses for business use of your home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance, and repairs.
How much of my home can I write off for business? ›
The simplified option has a rate of $5 a square foot for business use of the home. The maximum size for this option is 300 square feet. The maximum deduction under this method is $1,500. When using the regular method, deductions for a home office are based on the percentage of the home devoted to business use.
How much can you write off for a home office in Canada? ›
The maximum an eligible employee could claim using this method was $400 (i.e., 200 working days) in 2020 and $500 (i.e., 250 working days) in 2021 and 2022. A completed and signed Form T2200 or Form T2200S was not required for employees to claim a deduction under the temporary flat rate method.
Can I write off my internet bill if I work from home? ›
The internet makes it possible for you to run your own business, and without it, your business wouldn't exist. You can deduct internet costs if you work from home or regularly do business online. Running a business online can include: Acquiring new business or customers through various platforms.
Can you run a business out of your house in Canada? ›
Generally, if you are working alone in a home office, there will not be any zoning issues. However, if you are manufacturing a product, for example, and require employees to work out of your home, and/or you are causing pollution, excessive waste or noise, you may have a zoning issue.
Can I write off part of my mortgage for a home office? ›
Mortgage and Rent
You can't deduct your mortgage payments. Mortgage interest and rent payments can be deducted, but only the portion that applies to your home office. The IRS has a home office deduction worksheet that will help you calculate this (scroll to the bottom of the document).
What are the disadvantages of claiming home office on taxes? ›
Are there downsides to the home office deduction? The major drawback isn't specific to the deduction itself -- but rather the dreaded self-employment tax. If you work for yourself or own your own small business, you'll be taxed at a rate of 15.3% on the first $142,800 of your combined wages, tips and net earnings.
How much of my phone bill Can I claim as a business expense? ›
If you're self-employed and you use your cellphone for business, you can claim the business use of your phone as a tax deduction. If 30% of your time on the phone is spent on business, you could legitimately deduct 30% of your phone bill.
Can I write-off my garage as a business expense? ›
Can I deduct expenses for a separate structure on my property, such as a detached garage or studio? Yes, you can deduct expenses for a separate structure that is used exclusively and regularly for business purposes.
You can either deduct or amortize start-up expenses once your business begins rather than filing business taxes with no income. If you were actively engaged in your trade or business but didn't receive income, then you should file and claim your expenses.
What can I write off if I work from home in Canada? ›
As an employee, you may be able to claim certain home office expenses (work-space-in-the-home expenses, office supplies, and certain phone expenses). This deduction is claimed on your personal income tax return. Deductions reduce the amount of income you pay tax on, so they reduce your overall income tax liability.
What house expenses are tax deductible in Canada? ›
The Multigenerational Home Renovation Tax Credit will be worth 15 per cent of expenses paid up to $50,000 for a maximum credit of $7,500 as of 2023. There are also tax credits related to environment retrofits such as home insulation, windows, doors, and heat pumps, Mr.
What can be written off as business expenses in Canada? ›
The following may be considered when determining operating expenses:
- advertising.
- allowance on eligible capital property.
- bad debts.
- business start-up costs.
- business tax, fees, licenses and dues.
- business-use-of-home expenses.
- capital cost allowance.
- delivery, freight and express.
Your cellphone as a small-business deduction
If you're self-employed and you use your cellphone for business, you can claim the business use of your phone as a tax deduction. If 30% of your time on the phone is spent on business, you could legitimately deduct 30% of your phone bill.
What are indirect home expenses? ›
Indirect expenses — mortgage interest, insurance, home utilities, real estate taxes, general home repairs — are deductible based on the percentage of your home used for business.
Are home repairs a business expense? ›
You can deduct all or part of home repair costs if you have a business and use a portion of the home as an office for the business. To qualify for the home office deduction you must have a legitimate business and use part of your home exclusively and regularly for the business.
Can I write off my car purchase as a business expense? ›
If you use your car only for business purposes, you may deduct its entire cost of ownership and operation (subject to limits discussed later). However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use.
