Work Space in the Home Expenses
You can deduct expenses you paid in the tax year for the employment use of a work space in your home, as long as you meet one of the following conditions:
- The work space is where you mainly do your work, and by “mainly” that means more than 50% of the time.
- You use the work-space only to earn your employment income.
- That work-space also has to be used on a regular and continuous basis for meeting clients, customers, or other people in the course of your employment duties.
Since these work from home expenses relate to your employment – your employer has asked you to work from home – to be able to claim these expenses, you must have a signed copy of Form T2200, Declaration of Conditions of Employment, this form is fully completed and signed by your employer.
What Can Deducted
You can deduct the part of your costs that relates to your work space, such as:
Cost of electricity – Heating – Maintenance – Property taxes – Home insurance
What Can NOT Be Deducted
You cannot deduct mortgage interest or capital cost allowance (depreciation).
How To Calculate: Home Owned
To calculate the percentage of work-space-in-the-home expenses you can deduct, use a reasonable basis such as the area of the work space divided by the total finished area (including hallways, bathrooms, kitchens, etc.). An easier way to look at this is take the total number of rooms in the house, and the number of rooms being used for work. Take the percentage. So if there is one room being used out of 5 rooms, the 1/5 = 20%. 20% of the house is being used for work.
For maintenance costs, it may not be appropriate to use a percentage of these costs. For example, if the expenses you paid (such as cleaning materials or paint) were to maintain a part of the house that was not used as a work space, then you cannot deduct any part of them.
Alternatively, if the expenses you paid were to maintain the work space only, then you may be able to deduct all or most of them.
How To Calculate: Renting
If your office space is in a rented house or apartment where you live, deduct the percentage of the rent and any maintenance costs you paid that relate to the work space.
The amount you can deduct for work-space-in-the-home expenses is limited to the amount of employment income remaining after all other employment expenses have been deducted.
You can only deduct work space expenses from the income to which the expenses relate, and not from any other income.
Please note: You cannot use work space expenses to create or increase a loss from employment.
BUT…
If you cannot deduct all your work space expenses in the year, you can carry forward the expenses. You can deduct these expenses in the following year as long as you are reporting income from the same employer. You still cannot create or increase a loss from employment by carrying forward work space expenses, but you can use it to reduce taxes owing.
Complete the “Calculation of work-space-in-the-home expenses” portion of Form T777, Statement of Employment Expenses.
Enter the lower amount of line 24 or 25 of Form T777 at line 9945.
Enter on line 229, the allowable amount of your employment expenses from the total expenses line of Form T777.
Or just enter all of this information into any version of TurboTax (top of page, click on Products & Pricing) and let the program do all the calculations, or provide this information to one of our tax experts when you sign up for either TurboTax Live, Assist & Review or choose the Live Full Service option so they know to include it on your return.
Summary
If you use your work space for business and personal use, you must only deduct the business portion.
You can only claim expenses that you pay for out of pocket. If an employer pays for any of your business expenses, or reimburses you for any such expenses, you may not include these amounts. You also may not use your home business expenses to create a loss. All of your other business expenses, such as advertising and legal fees, must be deducted first, says the CRA.
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