*I am not a tax professional. This is meant to be educational and NOT a recommendation. Each personal situation is different and there’s a lot of grey area in self-employed deductions. If you have questions (even just little ones) … talk to a tax expert.*
There are obvious perks to working from home. You can avoid the perils of wearing pants and you’re always in close proximity to the fridge.
Well, those perks continue at tax time. The CRA lets you claim a deduction on your home office/workspace under a few conditions…
Do you qualify for the ‘Workspace in your home’ Deduction?
The CRA website breaks it down thusly:
“You can deduct expenses for the business use of a work space in your home, as long as you meet one of the following conditions:
- it is your principal place of business; or
- you use the space only to earn your business income, and you use it on a regular and ongoing basis to meet your clients, customers, or patients.”
Source: CRA Website
‘Principal place of business’ means that you don’t have another office space somewhere else where you do most of your work.
‘Using the space ONLY to earn business income’ means that if it IS your second office… you use that space in your home only as an office (and you use it pretty regularly).
Basically, they want to make sure that you’re able to deduct the space that you use for working, but in a reasonable way (the key word in any deduction conversation: reasonable).
What costs can you actually deduct?
You can deduct part of your:
- maintenance costs (heat, home insurance, electricity, cleaning materials)
- property taxes (if you own your house)
- mortgage interest (also if you own)
*TAX PRO TIP: if you’re doing your own taxes there’s no actual slot for rent – it gets categorized as ‘other’
How much can you deduct?
You can deduct a percentage of those expenses based on how big your workspace is.
Here’s how to figure it out:
- Grab a tape measure and measure the area that you work in.
- Divide that number by the square footage of the entire house/apartment (it should be in your lease/property breakdown… if not use your handy dandy tape measure).
- IF you use the room you measured for business AND personal (like a living room that has a desk as well as the TV) – calculate the hours that you use for business and divide that by 24 hours.
- Multiple the number from the 3rd step by the number from the 2nd step.
That’s the percentage of your costs that you can deduct.
My 2015 home office deduction (and how I calculated it)
We have a studio/office space in the place that we rent that is exclusively for work (which is different from the last few places where the work area was in a multi-use room) so it made the calculation pretty simple.