Claiming your home expense tax deductions can result in big tax saving. If you are work-at-home employee or self-employed, you may be qualified to claim your home expense tax deductions.
Make sure you are qualified to claim home expense tax deductions.
If you are work-at-home employee, you must get your employer’s signature on a form T2200 – Declaration of Conditions of Employment, which should confirm that you are required to do some work from home.
If you are self-employed, to be qualified to claim the deduction, at least one of the two following conditions must be met:
- Your home office is your principal place of business; or
- You use the work space in your home only for the purpose of earning business income, and use it on a regular, ongoing basis to meet clients or customer.
If you have offices inside and outside your home and you want to claim home expense tax deductions, you need to be prepared with enough information to support your claim that you use your home office on a regular and continuous basis for your business.
Know what home expense tax deductions you can claim.
If you are work-at-home employee, you can claim
- Utilities
- Maintenance
- Rent
- Insurance if you are commission employee
- Property taxes if you are commission employee
If you are self-employed, you can claim
- Utilities
- Maintenance
- Insurance
- Property taxes
- Mortgage interest
Calculate the percentage of home expense you can claim
Once you calculate the total home expense, you have to determine the percentage you can claim as your business expense. It must bases on reasonable basis, such as the percentage of the total area of your home that the work space represents.
Don’t claim capital cost allowance (CCA) on your home office.
You can claim capital cost allowance (CCA) on the appropriate percentage of your home, but it has two disadvantages.
- Any CCA you claimed will be recaptured into income when you sell your home.
- CRA will not allow you claim the principal residence exemption. It means you have to pay tax on capital gain when you sell your home.
You cannot create business loss by claiming home expense business deduction. However, the excess amount that cannot be claimed in the year may be carried forward and deducted in the subsequent year.
Any questions, please don’t hesitate to contact us.