Working from home does not automatically create a tax deduction, and the rules are noticeably different for employees than for the self-employed. Getting the category right is the first step.
If you are an employee
You need your employer to complete and sign form T2200, confirming you were required to work from home and to pay for certain costs yourself. Without it, there is no claim. You then use form T777 to report the expenses.
Employees can generally claim a share of utilities, maintenance, and rent. Employees who earn salary cannot claim mortgage interest, property tax, insurance, or capital cost allowance on the home. Commission employees may claim a somewhat wider range.
If you are self-employed
The claim goes on form T2125 as business-use-of-home, and the range of eligible costs is broader: a share of mortgage interest, property tax, home insurance, utilities, and maintenance.
To qualify, the space must be either your principal place of business, or used exclusively for business and regularly for meeting clients.
Working out the business portion
The usual approach is by area: divide the square footage used for work by the total square footage of the home. If a room is genuinely used for both work and family life, reduce the claim further to reflect the hours it is used for business. A dedicated room gives a cleaner and more defensible claim than a corner of the kitchen table.
The limit worth knowing
For the self-employed, home office expenses cannot create or increase a business loss. If your claim exceeds your income from the business, the excess is not lost. It carries forward and can be applied against income from the same business in a future year.
A caution on claiming your home
Claiming capital cost allowance on the portion of a home you own can affect the principal residence exemption when you eventually sell, and potentially create a taxable gain. Most owners are better off not claiming it. Ask before you do.
Keep the support
Keep utility bills, rent or mortgage statements, property tax notices, and a note of your measurements. The CRA reviews home office claims relatively often, and a claim you can substantiate in ten minutes is worth far more than one you have to reconstruct from memory. If you would like your claim reviewed before it is filed, talk to us.
A note on this article: tax rules and deadlines change. This article is general information, not advice for your specific situation - for that, talk to us.