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Home Office Tax Deductions: Low Hanging Fruit to Maximize Tax Savings

Updated: Jan 25, 2023

As a small business owner in Canada, you may be eligible for tax deductions related to your home office. You can deduct expenses for the use of a home office as long as you meet one of the following criteria:

  • Your home office is your principal place of business; or

  • You use the space only to earn your business income, and you use it on a regular and ongoing basis to meet your clients, customers, or patients.

One of the most common home office deductions available to small business owners is the cost of maintaining and repairing your home office. This can include expenses such as painting, cleaning, and repairs to your office space.

You can also claim a portion of your mortgage interest, property taxes, and home insurance if you are using a portion of your home exclusively for business purposes. If you rent, you can deduct part of the rent and expenses incurred on the home office portion of your home.

Another home office deduction that is available to small business owners is the cost of office equipment and supplies. This can include things like computers, printers, office furniture, and office supplies. You can also claim a portion of your internet and phone expenses if they are used primarily for business purposes.

In order to claim home office deductions, you will need to keep accurate records of your expenses. This includes receipts and invoices for all of your business expenses.

It's important to note that in order to maximize home office deductions, your home office should be used exclusively for business purposes. However, if you use the space for any personal or non-business activities you can still claim home office deductions by calculating the number of hours in the day you use the room(s) for business and divide by 24 hours.

The Canada Revenue Agency (CRA) has a detailed guideline for calculating the portion of your home that can be claimed as home office, called T2125 form, which you should fill out and submit with your tax return.

Your business use of home deductions cannot be used to create or increase a net loss for the taxation year, meaning you can deduct the lesser of the following amounts:

  • Carried forward amounts from the prior taxation year, plus expenses incurred in the current year; and

  • Your net income (loss) after adjustments

The following fiscal period you can use any amounts you were not able to deduct in the prior year, using the same criteria above.

More to come soon!

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