Calculating Your Home Office Deduction

by Craig Anthony

2 min read

If you are self-employed and have a home office, you may be able to write off expenses related to that space on your tax return. The Canada Revenue Agency has criteria in place regarding who can claim this deduction, and if you qualify, you can deduct some of your home expenses from your business income, lowering your overall tax burden.

Qualifying Criteria

To qualify, your home office must be your main place of business, or you must only use the space for business and regularly meet clients there. For example, if you have a room that you use for both personal and business use, you may only claim this deduction if that is your main place of business. If you do most of your work from another location, you may only claim this deduction if you meet clients in your home office and if it is not used for any other purpose.

Allowable Expenses

To calculate your business-use-of-home deduction, start by adding up all of the eligible expenses related to your office. This includes utility bills, home or renter’s insurance, and the cost of cleaning materials. If you rent, you should also include your rent in this calculation, and if you own your own home, you should include property taxes, mortgage interest payments, and capital cost allowance.

Percentage of Total Space in the Home

Once you total your expenses, you need to determine the relative amount of space your home office takes up in your home. For example, if your office is 200 square feet and your home is 2,000 square feet, your office takes up 10% of your home. In this case, you may write off 10% of allowable expenses. For example, if your rent is $1,800 per month, you may write off $180 in rent per month as a business expense. This rule only applies if you use the space exclusively as an office. If you also use the space for personal use, you have to do an additional calculation.

Shared Spaces

If your home office doubles as a guest room, lounge, or other personal area, you need to count up the number of hours you spend working there. Then, you must divide that number by 24 and multiply the result by your eligible home office expenses.

To explain, imagine you have a room that acts as your home office during the day, but in the evening, your kids use the room for homework and video games. You use the room as an office for eight hours per day, and when you divide this number by 24, the result is one third. To continue with the above example, if you determined that you may write off $180 of your rent every month as a business expense, you must now multiply that number by one-third. The result, or $60, is the amount you may claim as a business expense. Form 2125, Statement of Business and Business Activities, has a chart to help you with these calculations.

References & Resources

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