What are some home office grey areas I should be aware of?
You can only claim home office expenses if you have business income and your home is your primary place of business.
The general rule of thumb for home office expenses is to take the square footage of your dedicated home office and divide it by the total square footage of your home. You can claim that percentage of your home expenses as a business expense. If you don’t have a dedicated office space (say you’re working from the dining room table), you’ll have to figure out the percentage of time you use that space for work.
TIP: Don’t claim more than 15% for home office if you want to fly under the radar of the CRA.
These are the home office expenses that you include in this calculation:
- Interest on your mortgage payment (not your entire mortgage payment) or your entire rent payment
- Utilities
- Property taxes
- Insurance
For example, if your home office is 120 square feet and the total square footage of your home is 1,200 square feet, you can claim 10% of the expenses listed above.
Home office grey areas
Don’t include certain home expenses in your home office calculation (these should be calculated separately):
- Home internet: You need that internet to run your business, so it seems quite reasonable to write off 50% of internet costs.
- Security system: If you need the security system for your business, then a larger portion may be reasonable.
- If you regularly see clients at your home (weekly), then your field of write-offs really opens up: coffee, magazines, cleaning, snow shoveling, yard maintenance, etc.
Claim 100% of the supplies and furniture for a dedicated home office space: furniture, iPads, headphones, even houseplants! Renovations to the dedicated space can also be a business expense.
If the business use of the garage or basement puts you above the recommended 15% of total square footage, then rent this space to yourself, instead of including it in home office expenses. You can claim home office expenses and shop rent, under different line items of the tax return. If you claim rent, you will have to claim the income on your personal tax return, but you can deduct a percentage of your home operating expenses (same categories as above).
Most insurance companies want to know if you have a home-based business. If your home insurance increases because of the business, the increase should be a 100% business expense, in addition to percentage for home office expenses.