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Can I Deduct My Home Office Expenses?

Key Takeaways:

  • There are many home office expenses that are tax-deductible and can be claimed to reduce your overall tax payments
  • Home office expenses can include utility bills, mortgage, property taxes, etc.
  • There are specific forms to fill out when filing taxes to claim these home office expenses
  • Work with an expert accountant to identify the different expenses you can claim and any supporting documentation you may need to submit

As a result of the COVID-19 pandemic, many Canadians have turned to entrepreneurship and starting their own business from the comfort of their own homes. Whether you are an entrepreneur or working remotely for a major company, there is potential to reclaim some expenses as part of your tax returns.

In this article, we will cover some of the most common tax deductions, approved by the CRA that small business owners can claim.

What type of expenses can I claim?

WorkSpace Expenses

For the 2020 tax year, you may deduct workspace expenses to the extent that the work space meets one of the following conditions:

  1. The work space is the place where you principally (more than 50% of the time) perform employment duties for a period of at least 4 consecutive weeks
  2. You use the workspace exclusively during the period in respect of which the expenses relate to earn employment income, on a regular and continuous basis for meeting customers or clients.

Types of Home Office Expenses: The Income Tax Act provides support that deductible workspace expenses consist of a reasonable proportion of expenses paid by you for the maintenance of the home, for example, the cost of:

  • Electricity, heating, and water
  • Maintenance costs
  • Minor repairs
  • Home internet fees
  • The portion of condominium fees such as electricity, heat, and water
  • A reasonable portion of rent if the home is rented

Specifically excluded from the claim list for salaried people are the following items:

  • Mortgage interest and/or principal mortgage payments
  • Property taxes
  • Home Insurance
  • Home internet setup fees
  • Capital Cost allowance on the home (if owned)

Some other considerations include:

  • If you pay your utilities (electricity, heat, and water) directly to a service provider, no portion of condominium fees are deductible.
  • Costs that are directly incurred in relation to the work space may be fully deductible but cannot include items that are capital in nature. Thus, cleaning costs that are specific to the work space that is exclusively used as a work area would be deductible.

Internet cost allocation

A fair and reasonable method to allocate bundled costs such as home internet would be based on the time when the internet is being used for business purposes in relation to the time used for personal purposes. This could be tracked by monitoring the time access usage for the internet between business use and personal use and taking into consideration if there were multiple family members using the internet at the same time to arrive at a reasonable allocation rate to be applied throughout the period of time where you were working principally from home.

You can deduct the internet access fees (the cost of the plan must be reasonable). You cannot claim connection fees, or the portion of fees related to the lease of the modem/router.

Office Supplies and Furniture

People are also able to claim a deduction for the cost of office supplies and expenses that are used directly in the performance of employment duties.

Common office supplies that are deductible include:

  • Stationery items, such as pens, pencils, toner, ink cartridges, paperclips, charts, and stamps
  • Long-distance telephone calls incurred for work purposes
  • Cell phone airtime charges incurred for work purposes

Capital expenditures of office equipment and furniture are not deductible, including calculators, briefcases, monitors, computers, printers, and office furniture.

FShad CPA Professional Corporation can work with you to identify different eligible expenses and fill out the required forms in claiming them as tax deductibles.

Book a consultation today and get started with our team of expert accountants!

FShad CPA Professional Corporation

Call us at (844) 982-4700 or send us an email at info@shadcpa.ca

3850 Steeles Avenue West, Unit 10 – Suite 203.

Woodbridge, ON, L4L 4Y6.

 

This publication is produced by FShad CPA Professional Corporation as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors. Your use of this document is at your own risk.