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Working from Home in Canada: Tax Deductions

Working from Home in Canada: Tax Deductions

Canadians who have retired from work opt to continue working either as an encore career to as they engage in an entirely new venture. While some of them consider being a part of an office where they work there full time, many are considering working at home—and enjoying all the perks and convenience of working therein.

Apart from being a comfortable means to be working, working from home can bring about a number of tax deduction for the employee or self-employed. And it’s always well worth checking whether your home office qualifies for these deductions.

It is important to note though that tax deductible expenses vary on the kind of worker you are—deductions for employees and self-employed individuals are different.

For Employees:

Employees who work at home only qualifies for tax deduction if their employers specifically require them to maintain an office at home. This also requires their employers to sign a T2200 federal form to certify the fact.

Your home office must also satisfy either of these conditions:

  • The workspace must be where you “principally perform the duties of employment.” Principally means more than 50 per cent of the time.
  • Failing the first condition, the workspace must be used only to earn employment income, and you must use it on a regular and continuing basis to meet clients or customers.

For qualified employees, there is a specific list of what can and can’t be deducted. Employees can only deduct a percentage of the cost of maintaining the office. Deductions include the cost of heating, electricity, minor repairs and cleaning. Mortgages are generally not deductible.

For Self-Employed:

The range of available home office deductions for self-employed expands dramatically. Aside from a prorated portion of your rent, maintenance and repairs, and utility; self-employed workers can also claim a portion of home insurance, mortgage interest costs, and property taxes. A business phone line is also completely deductible.

Self-employed workers can also claim capital cost allowance on the home office portion of their home. Home office expense claims though can’t be used to create or increase a loss from employment.

The CRA’s T2125 form (Statement of Business or Professional Activities) must be filled out to claim these expenses. Page 3 of this form deals with the calculation of business-use-of-home expenses.

Opting to work from home can bring you an enormous savings on tax; however, know that this too requires a lot of paper work and documentation to be availed of.


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