If you are an employee, self-employed or have your own corporation and work out of your place of residence you may be eligible to claim home office expenses in order to reduce your personal or corporation’s income which will help reduce any tax payable.
In order to be eligible to claim any home office expenses the Canada Revenue Agency (CRA) requires you to perform more than 50% of work out of your home. This includes creating goods for sale, providing services for sale and meeting with potential or current clients. Also, if you are an employee you will need to have your employer sign a T2200 form indicating that you are required to work from home and that you are not being reimbursed for the expenses claimed.
If you meet the requirements for a home office, you are able to claim a portion of the following expenses: Utilities, telephone, internet, property taxes, insurance, mortgage interest and maintenance. The mortgage interest, insurance and property tax expenses are limited to those who are self-employed or have their own corporation.
To determine how much of those expenses you can claim, you take the square footage of the area used for work and divide by the total square footage of the house or apartment. If there are any expenses solely related to employment, such as a separate shop where fabrication occurs, any expenses related to that area can be fully deducted.
In addition to the limitation of expenses to the square footage, home office expenses are not able to create a tax loss for employees or self-employed workers, it can only be used to bring your income to nil but any leftover home office expense can be carried forward to reduce income from the same employer in future years.
If you feel that you are eligible to claim any home office expenses please contact Moeller Matthews and ask to speak to one of our chartered professional accountants!