Home Business Tax Deductions

Yes, it's true! You can claim home business tax deductions if you have a home business or if you have an office you work out of in your home. You may qualify to deduct a portion of your major household expenses, how great is that!?

There are many deductions in this category at your disposal, of course, there are a set of laws in place…

Who can claim?

Self employed individuals, salaried employees as well as employees that earn a commission are entitled to claim home business tax deductions if the following apply:

• It is predetermined in your contract that you pay for these expenses
• The expenses are directly related to your work and employment
• You will not be getting repaid or compensated in any way for these expenses

• You work from home at least 50% of the time
• The workspace is used only to earn income a regular basis to meet clientele.

There are different qualifications required for different employed individuals

• Salaried employees can not deduct mortgage interest, property taxes or house insurance
• Commission employees can not deduct mortgage interest expenses.

Whereas self employed individuals can take full advantage of all that is available.

What can I write off?

A few of the more common home business tax deductions are

• Mortgage interest deductions
• Property tax deductions
• Home office tax deductions
• Tax deductions for homeowner
• Heat
• Electricity
• Insurance
• Maintenance

You can only deduct the percentage that is relevant to your work space. If your work space is 20% of your residence, only that amount of the expense can be deducted.

For example if the total expense is $1000.00 the 20% claim allowable is $200.00

Work space square footage divided by the total square footage of residence, multiplied by expenses.

This will give you the person use part of expenses

Example - 20sq ft divided by 100sq ft = .2 multiplied by $1000. = $200

Subtract that amount from the total amount of expenses and you will end up with the business use allowable.

If you use the same room or rooms of your home for both business and personal activity, calculate how many hours in the day you use the rooms for your business, and then divide that amount by 24 hours.

Multiply the answer by the business part of your total home expenses. This will give you the household expense you can deduct.

I am not a homeowner, can I claim my rent?

Yes, you can deduct the part of rent related to the work space used.

Can I claim more expenses than I have income?

Claiming the home business tax deduction is allowed to bring your income to zero but you can not create a loss. Although, any amount not used can be forwarded to the next year.

I am looking to work from home, can you suggest a business that would be both successful and profitable?

Yes, I certainly can! Everything that is needed to start and build your own successful business is right here at your fingertips. See below and click on "MORE". What makes you feel great?

If you find yourself answering yes to one of the following questions, click on the blue MORE button above:

Are you interested in sharing your passion with the rest of the world?    

Or

If you are not sure what your calling is, are you ready to discover it? 

More detailed information and forms on business use of home expenses can be found on the CRA links below

Business and Professional Income Guide T4002

Income Tax Folio S4-F2-C2

Commission Employees

Salaried Employees will also need to complete Form T2200

Statement of Employment Expenses must be completed for salary and commission employees

Statement of Business or Professional Activities Form T2125

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