Home Office Write-Offs in Canada

By understanding home office expenses, you can unlock the potential tax savings hidden in your home workspace.

In Canada, you can deduct certain home expenses, primarily when you use a portion of your home for business purposes (as a self-employed individual) or as an employee working from home. The rules and eligible expenses differ slightly depending on your situation.

Need help navigating your home office write-offs? Discover our bookkeeping and tax services designed to simplify your finances.

Here's a breakdown of the main uses of home expenses you can deduct:

1. Business-Use-of-Home Expenses (for Self-Employed Individuals)

If you are self-employed and use a workspace in your home to earn business income, you may be able to deduct a portion of your home expenses. To qualify, one of the following conditions must be met:

• It is your principal place of business. This means you conduct most of your business operations from home.

  
  

• You use the space only to earn your business income, and you use it on a regular and ongoing basis to meet your clients, customers, or patients.

  
  

If you meet these conditions, you can deduct a portion of the following expenses based on the size of your workspace relative to your entire home (e.g., square footage of office divided by total square footage of home):

• Utilities: Heating, electricity, water, and the utilities portion of your condominium fees.

• Home Insurance: A portion of your home insurance premiums.

• Property Taxes: A portion of your municipal property taxes.

• Mortgage Interest: The interest portion of your mortgage payments (not the principal).

• Rent: If you rent your home, a portion of your rent.

• Maintenance and Minor Repairs: Costs directly related to your workspace (e.g., repainting the office) or a prorated amount for shared repairs (e.g., roof repair).

• Internet and Phone: The portion used exclusively for business purposes.

  
  

Important Notes for Self-Employed:

• You generally cannot use these expenses to create or increase a business loss. Any unused expenses can be carried forward to future years.

• You cannot deduct the capital cost allowance (depreciation) on your primary residence if you claim these expenses, as it can trigger capital gains rules when you sell your home.

• Keep detailed records and receipts for all your expenses.

If you're unsure how to organize your records or want expert guidance, contact our team for personalized support.

2. Home Office Expenses for Employees

If you are an employee working from home, you might be able to deduct certain expenses, but the eligibility criteria are stricter and require a Form T2200, "Declaration of Conditions of Employment," from your employer.

Eligibility for Employees (for 2023 and later tax years, as the temporary flat-rate method is no longer available):

• Your employer required you to work from home. This can be a written or verbal agreement, or a formal telework arrangement.

• You were required to pay for expenses related to the workspace in your home, and these expenses were not reimbursed by your employer.

• Your workspace is where you mainly (more than 50% of the time) worked for a period of at least four consecutive weeks in the year. Alternatively, you used the workspace only to earn employment income AND you used it regularly and continually for in-person meetings with clients.

• You have a completed and signed Form T2200 from your employer.

  
  

Eligible Expenses for Employees (Detailed Method):

If you meet the above criteria, you can claim a portion of the following:

• Utilities: Electricity, heat, water, and the utilities portion of your condominium fees.

• Home Internet Access Fees: A reasonable portion related to your employment use.

• Maintenance and Minor Repair Costs: Direct expenses for your workspace (e.g., light bulbs, repainting) or a prorated share of general maintenance.

• Rent: If you rent your home, a reasonable portion of the rent.

  
  

What Employees Cannot Deduct:

• Mortgage interest or principal payments.

• Property taxes.

• Home insurance.

• Capital expenses (e.g., furniture, computers, or major renovations like replacing windows). These are generally not considered "current" expenses that are used up.

  
  

General Principle for Calculating Deductions:

For both self-employed individuals and employees, the deductible amount is generally calculated based on the proportion of your home used as your workspace. This is often done by dividing the square footage of your dedicated workspace by the total square footage of your home. If a room is used for both business and personal purposes, you would also factor in the number of hours per day it’s used for business.

Be sure to keep detailed records and receipts to support any deductions you claim. For complex situations or to ensure you maximize your eligible deductions, it’s always advisable to consult a tax professional, such as Orillia Simcoe Bookkeeping, and follow the CRA guidelines.

Our QuickBooks coaching services can help you track your expenses accurately and efficiently.

Let's walk through an example case for calculating home office expenses in Canada.

Self-Employed Individual (Freelance Graphic Designer)

Scenario: Sarah is a freelance graphic designer who runs her business from her home in Orillia, Ontario. Her home is 1,800 square feet in total, and she uses a dedicated spare bedroom as her office, which is 180 square feet. This office is used exclusively for her graphic design business, and it's her principal place of business.

Annual Home Expenses (for the entire home):

• Mortgage Interest: $12,000

• Property Taxes: $4,000

• Home Insurance: $1,500

• Utilities (Electricity, Heat, Water): $3,000

• Internet: $1,000 (Sarah uses this for both business and personal, but she estimates 80% is for business)

• Cleaning Supplies (for the whole house): $300

• Office-specific repair (new light fixture in the office): $150

  
  

Calculation Steps:

1. Determine the Business Use Percentage (by Area):

   • Office Area: 180 sq ft

   • Total Home Area: 1,800 sq ft

   • Business Use Percentage = (180 / 1,800) * 100% = 10%

2. Identify Eligible Expenses and Prorate:

   • Mortgage Interest: $12,000 * 10% = $1,200

   • Property Taxes: $4,000 * 10% = $400

   • Home Insurance: $1,500 * 10% = $150

   • Utilities: $3,000 * 10% = $300

   • Internet: Sarah uses 80% of her internet for business. $1,000 * 80% = $800. (Note: If she used it for both and her office was a shared space, she'd also factor in time. Since it's a dedicated office, the 80% business use is more direct.)

   • Cleaning Supplies: $300 * 10% = $30 (prorated for the whole house)

   • Office-specific repair: $150 (This is 100% deductible as it's directly for the office space).

3. Total Deductible Home Expenses: $1,200 (Mortgage Interest) + $400 (Property Taxes) + $150 (Home Insurance) + $300 (Utilities) + $800 (Internet) + $30 (Cleaning Supplies) + $150 (Office Repair) = $3,030

   
   

Important Note: Sarah's total home office expense deduction ($3,030) cannot exceed her net business income before deducting these expenses. If her net business income was only $2,500, she could only claim $2,500 this year and carry forward the remaining $530 to a future year.

Want to make sure you're claiming every eligible deduction? Get in touch with us today to see how our bookkeeping, tax, and QuickBooks coaching services can help you.