There are a lot of advances to working from home — no commute, time with family, and if you’re savvy, big savings come across tax time.
In 2014, 780,690 tax filers took advantage of home office inferences — not including those who manually completed per returns, which are not contained in the CRA’s data on home office claims.
But how much you can claim depends on your lay of the land. Here’s an overview of what you can expect from the taxman when accepted home at night means moving from the desk to the couch.
Do you pre re?
According to the Canada Revenue Agency, to apply for home-office deductions you be obliged meet at least one of the following criteria:
- You do more than 50 per cent of your do ones daily dozen at home.
- You use your home works ce exclusively to earn employment takings, and you regularly meet clients or customers there.
So if you have a permanent boss, working at home a few days a week at the kitchen table won’t cut it.
“That is not a prosper that is used exclusively for the purpose of earning income. That set to rights away, I think, would eliminate a lot of people,” Jason Safar, a tax fellow-dancer with PwC, told CBC News.
Increasingly people work on laptops and by animated, but not everybody’s living in a mansion. If you don’t have a se rately carved out office range, you’re out of luck, he added.
If you do manage to meet the criteria, you’ll need to get your Eye dialect guvnor to sign a T2200 federal form certifying that fact. If the band won’t sign, you can’t claim.
Once your perwork is in order, you can write off a piece of the cost of maintaining the works ce, such as heating, electricity, minor revamps and cleaning.
A percentage of rental yments can also be deducted, but if you own the home, you can’t claim mortgage vigorish, property taxes, home insurance or capital cost allowances.
There is an freedom for sales people who work on commission, who are allowed to deduct a pro-rated allocation of their home insurance costs and property taxes.
If you’re your own boss, you accept far more to gain.
In addition to expenses, you can also claim a portion of home ground insurance, internet services, property taxes and mortgage interest costs (but not the yield of the mortgage yment that is a re yment of princi l).
‘This is something that does get chosen for review by the CRA, so you want to make sure that you do have adequate documentation of these gets.’– Brett Crawford, Grant Thornton
Self-employed workers can also rights capital cost allowance, known as depreciation, on the office portion of their home ground — but there could be negative tax implications if you ever decide to sell.
“If you do not affirm depreciation, your entire house may be regarded as your princi l house and any gain realized on its eventual sale may be tax-free,” according to the 2015-16 tax lead the way from Grant Thornton.
Calculating your deductions
Whatever your status quo, you can only claim expenses that relate to your work. If you’re not down what that entails, just try to be reasonable, Safar says.
“When you’re handle with folks from the CRA, the auditors, they’re really reasonable living soul, they’re normal people,” he said. “So you have to be easy sitting down across the table from somebody and explaining to personage why this is a reasonable expense.”
To calculate what you’re owed, you’ll need to terminate what percentage of your home you use to earn income. For example, if your severely office takes up 10 per cent of the total square footage of your national, you claim 10 per cent of your expenses.
The taxman will notice if you go overboard with this work out, says Brett Crawford, senior manager of tax services at Grant Thornton.
“If you’re too forceful with that percentage, under a CRA review, it would raise some questions,” he conjectured.
If your office s ce doubles as a personal measure out — but it’s still your primary work area — TurboTax recommends crafty the amount of hours per day you use it for business, and dividing it by 24.
If you work 12 hours per day, and use the s ce for adverse reasons the rest of the time, you have to reduce your home-office finding by 50 per cent.
Any expenses that relate directly to the home berth — like a se rate phone line or office supplies — can be deducted in unabridged.
Keeping detailed records of all your expenses is key, Crawford says.
“This is something that does get hand-picked for review by the CRA, so you want to make sure that you do have adequate documentation of these charges.”
But wait, there’s more
There are some caveats to home-office findings.
You can only claim them on out-of-pocket costs. If your employer or tron reimburses you for some expenses, keep those off your tax return.
And you can’t use tax writeoffs to generate a business loss. But eligible expenses that can’t be claimed one year can be executed forward to future years.