1) You do 50% or more of your work from your home. Or
2) You only use the space in your home to earn your income and regularly meet your clients or customers there.
The CRA lets you deduct part of expenses that relate to your works space such as heat, insurance, electricity, maintenance and cleaning materials. Part of your property taxes or rent can also be claimed as an expense. You cannot claim interest on your mortgage (this is a change from previous years) or capital cost allowance. To figure out the allowable expenses use the workspace divided by the total area of your home. For example if your home is 2000 square feet and your workspace is 200 square feet you can claim up to 10% of your home expenses. A word of caution about maintenance expenses, don’t use expenses from other parts of your home; only use expenses that were paid in maintaining the actual work space.
You can claim some of your car expenses if you use it for business. You will need to track the mileage and maintenance. You can only use the portion of the expenses that are from your business use.
You can’t use your home business expenses to create a loss for income tax purposes. You can carry forward expenses that you couldn’t use.
When filing your taxes you need to complete form T2125, Statement of Business or Professional activities. Guide T4002 will help you complete the form properly.
As in all tax situations you should consult with a tax professional or the CRA.
This article was published in the February edition of Rhythm and News and Victor's Views.