Deducting Home Office Expenses

Are you aware that you can, in limited circumstances, deduct home office expenses?

The Income Tax Act is quite specific in determining who can deduct home office expenses and what expenses qualify.

A deduction for a workplace in the home is only available in one of the two following situations:

  1. The workspace is primarily where employment or business activities are carried out, or
  2. The workplace is used exclusively to earn income and is regularly and continuously used for meeting customers or suppliers.

The first alternative means that you must use your home office more than any workspace available to you at your employer’s or at a business location. The second means that your home workspace is not used for any other purposes and you meet customers or suppliers at that site.

Assuming you meet one of the above requirements, the total expenditures incurred for your home are prorated based on the proportion that your workspace is of your total home’s usable space. If the workspace isn’t exclusively used for earning income, the costs must be further prorated based on the business versus personal usage. For expenses to be deductible they must either relate to the home as a whole or relate specifically to the office.

Employees are subject to further restrictions. An employee can only deduct home office expenses if their employer certifies this requirement on Form T2200. They are limited to the nature of the expenses they may claim: they cannot deduct depreciation and mortgage interest, and can only deduct property taxes and insurance if they earn commission income.

If you wish more information, please contact one of our advisors about this deduction.