Since the COVID-19 pandemic, working from home has become an accepted part of the work world. Consequently, home office expense deductions have become a more common element of tax preparations and filings. This article explores the eligibility criteria of such deductions and offers 5 steps to help you calculate your home office deductions.
Eligibility Criteria
Before you begin to gather receipts and calculate home office expenses, make sure that your home office meets the Canadian Revenue Agency’s (CRA) criteria of a home office for tax filing purposes. To claim home office expenses, one of the following must be true:
A. Your home office is your principal place of business (i.e. you spend more than 50% of your business time there). This can be a specific room, a spot on the couch, or the kitchen table.
B. You use the space only to earn business income, and you use it regularly to meet clients, customers, or patients.
Tax Preparation Step 1: Measure & Calculate Your Office Space
If your business activities meet the criteria above, you need to clearly identify which space or spaces of your home you use for your work. This can be tricky if you use communal space, but accurate tax preparation requires measuring these spaces and calculating what percentage of your home’s finished area this represents.
Example
Office space 165 cm x 244 cm = 4.026 m2 X 100 = 3.66%
Home’s finished area 110 m2
Tax Preparation Step 2: Determine Your Expenses
You can deduct a portion of the following home expenses for your home office tax filings:
- utilities (heat, electricity, water)
- home or renter’s insurance
- property taxes (for homeowners)
- rent (for home renters)
- maintenance and minor repairs
- internet and phone services (if used for work)
- mortgage interest (for self-employed individuals only)
If you are self-employed and work from home, keep detailed records of all business expenses, including office supplies and furniture. You will need them for step 5.
Tax Preparation Step 3: Calculate Your Expenses
Calculate your annual total for each of the items listed in step 2. Then divide each total by the percentage of your home that your office represents.
Example
In step 1, we calculated that your office represents 3.66% of your 110 m2 home. Therefore, 3.66% of your annual expenses above can be considered a home office deduction.