If you have a home office, you may be eligible for a tax break by deducting a portion of your home expenses should you meet certain conditions.
Canada Revenue Agency (CRA) states that to be eligible for tax deductions, your home office must be the space where you do at least 50 per cent of your work. Someone who works as a landscaper, for example, probably does not qualify because not enough of their work takes place in the home workspace. For your home office to qualify, it must be an area that you use exclusively and on a continuous basis to generate income and where you meet clients or other people relating to your employment.
You can deduct a portion of your household expenses, including heating and utilities, property taxes, home insurance, electricity and maintenance. You can only deduct the workspace expenses from the income relating to the expenses, and not from any other income.
CRA suggests when deciding how much of your household expense you can deduct that you should “use a reasonable basis, such as the area of the work space divided by the total finished area (including hallways, bathrooms, kitchens and basements) of the home.”
For maintenance costs, you cannot deduct the cost of an upgrade to an area not related to your home office, such as a new kitchen window. If your expenses relate only to the work- space area, however, you may be able to deduct the entire cost. If you are not self-employed, your employer must complete and sign Form T2200 so you can claim any office expenses. Self- employed people must keep all their receipts in case of a CRA audit.
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. This means you cannot use workspace expenses to create or increase a loss from employment.
You can, however, carry forward expenses to the following year if you cannot deduct them all during the current year, but you still cannot use them to create or increase a loss.