Claiming Home Office Expenses

If you are an employee and are required by your employer to maintain and use part of your home as your principle place of business, you may be eligible to deduct home office expenses from your income. In order to qualify for this deduction you must have a separate room in your home that is only used for business, i.e. you cannot make a deduction if you use the dining room table! The amount deductible will be based on the ratio created when you divide your office square footage by the square footage of your home.

If this ratio is 10%, then you can deduct 10% of your rent, electrical and gas costs, water charges, repair and maintenance costs and depending on your type of employment income, you may also be eligible to deduct that portion of your home insurance and property tax costs. Unfortunately, no claim is allowed for mortgage interest if you are an employee and you will have to obtain a From T2200 from your employer annually to confirm to the Canada Revenue Agency that you are eligible to make the claim.

If you are self-employed and you own or rent a home, which is also your principle place of business, you may deduct from your business profit a portion of the expenses related to the space used such as:

• Rent or Mortgage interest
• Insurance
• Utilities
• Property taxes
• Maintenance

In order to calculate the deductible portion, the square footage of the home and the square footage of the space used for business are needed. The actual calculation would be as follows:

(A)Square Footage of Home Used for Business
(B)Square Footage of Entire Usable House Space
x (C) Allowable Expenses = (D) Deduction Available
(A/B x C = D)

In some circumstances you may use your personal living space for business as well. An example would be running a child care operation out of your home where the children use a designated play area plus the living room and kitchen. In this case, you will also need to calculate what portion of the day the area is used for the business. For Example: The living room and kitchen are used 40% of the time by the home-based child-care operator to provide child care services. The living room and kitchen are 400 square feet and the house is 2000 square feet. The total cost of hydro, insurance and rent is $15,000 per year. The deduction available would be 400/2000 x 40% x $15,000 = $1,200.