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Do you work from home as a sole proprietor, maybe having a home office? If so, did you know that you could reduce the amount of tax you pay by deducting a sum of money for home office expenses? If you have an area in your home that you work from, you should be able to claim for the cost of this, as long as you comply fully with the following conditions:

  • It is your main place of business
  • You use the space to work from home, providing an income on an ongoing regular basis. You may even meet clients or patients here.

What you can charge for

If this sounds like you, then various costs can be deducted. This includes such things as heating, home insurance, electricity, cleaning, property tax, mortgage interest and capital cost allowance (CCA). CCA refers to the process by which Canadian businesses claim depreciation expenses when calculating taxable income.

You need to be reasonable when working out the amount of space for which you will raise a charge. One way of doing this is to calculate the size of the home office and then divide this by the total size of the property.

How to calculate home office expenses

Things become a little more complex if your use part of your home for both working and living. When this is the case, you should make some basic calculations based upon how many hours each day you use the space for business. Divide this by 24 hours and then multiply the answer by the amount of your business home office expenses. This will provide you with a figure that you can enter into your accounts as a deduction.  If your home-based business does not operate for the full year, then you should reduce the amount of the claim pro-rata. If you do not own your home but rent it instead, then you should deduct the portion of the rent and any other expenses incurred by the home office workspace.

Remember that you must not deduct such a high sum of money that your net income becomes a minus figure i.e. you cannot use the amount of expenses incurred to create a business loss scenario.

Using form T2125

It is also worth noting that you can deduct the lower figure of any one of the following:

  • Any amount you carried forward from the previous year plus the home office expenses incurred in the present year.
  • The net income loss after an adjustment has been made.

In the next fiscal period, you will be able to deduct any expenses not shown in the current year.

Home office expenses should be calculated using the form T2125 – ‘Calculation of business-use-of-home expenses’. Remember not to include on the form any home office-related expenses that you have already claimed elsewhere.

You can download and print form T2125 here:



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