Home Office Expenses for Employees and Small Business

Hello All,

Whether you are an employee or a small business owner, you can claim home office expenses as long as you worked from home, although the rules are a bit different.

Employee Home Office Expenses

If you were an employee in 2021, you may continue to claim expenses at $2 per day, similar to 2020. This is referred to as the simplified method. Revenue Canada, has increased the maximum number of days that you can claim to 250 in 2021, from 200 in 2020. I recommend calculating this carefully as once you remove weekends, you are only left with 261 days in the year. If you also deduct vacation and sick days, there is a high likelihood that many of you worked less than 250 days.

Note: Starting in 2023, employees are no longer allowed to claim the $2 per day for home office. Instead they must complete form T2200 and have it signed by their employer.

Employees may also use the detailed method instead, as explained in my blog post below. This makes more sense for those of you who paid rent, which is claimable, and may therefore lead to a higher deduction than using the simplified method. Unfortunately, if you owned your house you cannot claim mortgage interest as an employee. It is probably worth doing the calculation (which can be done directly on CRA’s website - link in my blog post) to see which one results in a higher deduction.

Small Business Home Office Expenses

If you are an unincorporated small business owner, who reports their income on a T2125, then you have the option of claiming your home office as long as you don’t have another office (in which case additional criteria apply). Both rent or mortgage interest are deductible as are utilities, property taxes, heat, landscaping, snow removal and any other expenses that apply to your home as a whole or specifically to your office space. Ideally, to maximize your deduction, you should have a space in your home that is specifically dedicated to your home office i.e. not used for any other purpose. Otherwise you have to further prorate the deduction by the amount of time you work in the space (such as your living room) which reduces the deduction significantly.

See my blog post on claiming business home office expenses

If you have specific questions about QBO, accounting or tax, don’t hesitate to send me an email at contact@montrealfinancial.ca and I will attempt to answer it in future newsletters.

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