Turning a spare room into a small business centre is an effective way to carve out a dedicated work space in your home. Setting up the space is relatively straightforward, and in most cases, you can claim a tax deduction for your office-related expenses.
Make a list of all the things you need while working. If you currently work in an office, make sure to note the shared office equipment you use as well as the items in your office or cubicle. Depending on the type of work you do, the list may include desks, tables, computers, printers, scanners, paper shredders or related types of office equipment. Then, set up as much of that equipment in your office as possible, and find alternatives as necessary. For example, if you only send faxes once a month, you may be better off not buying a fax machine and paying for the service off-site as needed.
Connecting to the Outside World
When working remotely, you need ways to connect to your clients or co-workers; to make that possible, you need an internet connection. If you have Wi-Fi, make sure the signal is strong in the spare room, or use cables to set up a wired connection. Similarly, make sure mobile phone reception is strong and consistent, or set up a land line.
When you have a home office, you don’t have to work in a bland, uninspiring space; you can indulge your need for creature comforts. Set up a sofa or a comfortable chair to lounge in when you need a break from your desk, or put a treadmill in the corner so you can burn calories during conference calls. Consider hanging art or inspiring posters, and make sure you have window treatments that allow you to see your computer screen easily while letting in some natural light. You may even want to put in a mini fridge full of drinks, a coffee maker or a shelf for snacks.
Although decorating and making the space comfortable may not seem important, the ability to be in a personalized comfortable environment is actually linked with the boost in productivity typically experienced when working at home.
Home Office Deductions
If you are self-employed, the Canada Revenue Agency allows you to deduct expenses related to your home office from your self-employment income. To qualify, the spare room must be your principal place of business, or you must exclusively use it for business and regularly meet clients there. Similarly, if you are employed and your employer requires you to work from home, you may also claim a deduction related to home office expenses. The conditions for both deductions are the same, but the CRA allows different expenses in each case.
To ensure you receive the maximum deduction, track the expenses you incur when setting up your office, and consider using an expense tracking app or accounting software to organize your expenses. The deductions you can take vary based on whether you are employed or self-employed, but quality tax preparation software can help you figure out which expenses are deductible in each situation.