Many Canadians choose to work from home. Canada Revenue Agency allows these workers to claim home office deductions on their tax forms. However, there are a number of rules regarding these deductions and not all home-based workers qualify.
What qualifies as a home office?
As an employee, if your employer wants/allows you to work from home, then there are home office deductions that may be claimed, provided the arrangement meets one of the two following criteria:
- Your home office must be exclusively for working
- You must use that space to complete more than 50% of your work
- Your employer must require you to maintain a home office as part of your contract of employment.
- Your employer must not reimburse you for those expenses.
- You must fill out and have your employer sign, Form T2200, Declaration of Conditions of Employment.
How much can you claim?
The allowed claim for employees is limited to the amount of employment income remaining after all the other employment expenses have been claimed. You cannot create a loss from claiming home office expenses. Excess expenses can be carried forward and in most cases can be applied to future years.
What can you claim?
To determine the number of deductions you can claim you must separate the expenses between your employment use and non-employment (personal) use of your home.
- All salaried employees and commission employees can claim:
- utilities portion (electricity, heat, and water) of your condominium fees
- home internet access fees
- maintenance and minor repair costs
- rent paid for a house or apartment where you live
- Commission employees can also claim:
- home insurance
- property taxes
- lease of a cell phone, computer, laptop, tablet, fax machine, etc. that reasonably relate to earning commission income
What cannot be claimed?
Salaried employees and commission employees cannot claim:
- mortgage interest
- principal mortgage payments
- home internet connection fees
- capital expenses (replacing windows, flooring, furnace, etc)
- wall decorations
Are there any other limitations?
The expenses you can claim are limited when:
- you work only a part of the year from your home
- you have multiple income sources
When it comes to income tax, every deduction helps. Whether you file your own taxes or send them to an accountant, you should be informed of what home office expenses can be deducted from your income tax. Ask your CPA whether you meet the CRA’s requirements for home office deductions.
Need advice and/or assistance determining tax deductions for your home office? Contact Cook and Company Chartered Professional Accountants. We are based out of Calgary, Alberta, serving clients across Canada and the United States. We provide high-quality tax, assurance, financial and succession planning services for a wide variety of privately-owned and managed companies. Contact us for a complimentary consultation.