Write-offs if working from home

Are you working out of your home to run your own business? Does your employer require you to have an office at home? Are you a fully commissioned, home-based sales person?

Having to use your home to aid in your earning of income may qualify you for home office expenses that can be netted against your income. But in order to qualify, there are Canada Revenue Agency (CRA) criteria to meet.

If you are self-employed, your home has to be the principal place of carrying on your business, or your home office must be used exclusively to earn income by meeting with clients or patients.

The space to assemble or manufacture products for sale may also contribute to the availability of this deduction.

In addition to meeting the above CRA criteria, if you are an employee who is required to work out of home by your employer, it is necessary for your employer to supply you with form T2200, Conditions of Employment, indicating that you are required to have a home office.

If you fit either of these two situations, then you can use your home’s heat, electric, supplies, repairs and rent (if applicable) apportioned by the square footage of the space you use for your office versus the entire home’s square footage.

A rule of thumb to steer clear of a CRA red flag is to keep that portion of your office space in your home under 15 per cent.

By the way, if your home office is used some of the time as the kids’ study hall, than you are supposed to reduce your office apportionment by the percentage of time it is used by the kids. Confused?

Those with their own business can also deduct proportionally the cost of house insurance, property taxes, municipal services and mortgage interest.

If you are an employee, you cannot use these unless you are a fully commissioned sales person, then you too can use these deductions, except mortgage interest. Now are you confused?

You may have noticed no mention of the home phone/cable or Internet. That’s because they are typically disallowed by the CRA. My recommendation is that you set up a separate business account if it’s an important expense.

Occasionally I am asked if depreciation on the home can be included in the home office expense calculation. I typically advise against claiming any capital cost allowance since this may adversely affect the principal residence capital gains exemption when the home is sold in the future.

Regardless of what and how much is available for your claim, the CRA will not allow your home office expense deduction to exceed your income for the year. In other words, your home expenses cannot create a business loss.

However the CRA is kind enough to allow any unused balance to be carried forward and used against future income. Of course, you must again qualify for the home office deduction.

However, if you have had a career change, don’t forget about this carry forward. If in the future you again qualify for the home office deduction, it can be used at that time.

Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services.

Tax Tips & Pits runs the first and third Mondays until April. Email him at ron.clarke@JBSbiz.ca

Just Posted

Castlegar Remembers

Hundreds gathered at Kinsmen Park on Sunday to mark the Centenary of the end of WW1

B.C. Legions in need of young members to continue aiding veterans into the future

Lest we forget what thousands of men and women did to fight for Canada’s freedoms – but without new membership, many Legion chapters face dwindling numbers

Nine-vehicle pileup closes Highway 3 near Castlegar

Two separate incidents on slushy highway; reports of injuries

UPDATE: Police seek witnesses in Castlegar road rampage

Lake Country man faces 13 charges, including robbery, dangerous driving, flight from police, assault with a weapon, theft, and drug charges.

U.S.-based tech company planning Rossland location

GoToTags will use city as base to service Canadian customers

VIDEO: Marvel Comics’ Stan Lee dies

Marvel co-creator was well-known for making cameo appearances in superhero movies

VIDEO: Newcomer kids see first Canadian snowfall

Children arrived in Canada with their mother and two siblings last week from Eritrea

Feds dropped ball with WWI anniversary tributes: historians

Wrote one historian: ‘Other than the Vimy Ridge celebration … I think they have done a very bad job’

Sides ‘far apart’ in Canada Post talks despite mediation, says union

The lack of a breakthrough means rotating strikes will resume Tuesday

Feds’ appeal of solitary confinement decision in B.C. to be heard

Judge ruled in January that indefinite such confinement is unconstitutional, causes permanent harm

B.C. health care payroll tax approved, takes effect Jan. 1

Employers calculating cost, including property taxes increases

Nunavut urges new plan to deal with too many polar bears

Territory recommends a proposal that contradicts much of conventional scientific thinking

Shelter struggles: Landlord takes over rental unit whenever visiting B.C. town

Renter’s story highlights how hard it is to find accommodation in Revelstoke

Lack of public response threatens B.C. referendum credibility

Of the few who have voted, poll finds most rejected proportional representation

Most Read