Dollars and Sense: Home Office Expenses

By Sheila Nelson, CA

Claiming home office expenses can be a real pain.  Even when you do get them figured out, they may not be deductible in the year. 

If you are an employee and you work out of your home, you may be able to claim your home offices expenses.  You need to get the form T2200 signed by your employer.    Your employer has to answer the following 2 questions (see Question 10) on the form:

1.      Does the employee use a portion of his/her home for work?  This workspace must be where the employee mainly (more than 50% of the time) does his/her work or it is used exclusively to earn employment income and for meeting clients or customers on a regular and continuous basis.

2.      Did or will the employer reimburse the employee for any of the expenses?  If so, how much?

As you might guess, the first question can make the employer feel rather uncomfortable.  They will need to have a great deal of familiarity with their employee’s home office and their work habits to be able to answer “Yes”.  I have personally encountered situations where employers have refused to answer this question.

In addition, your deduction for home office expenses is limited to your employment income.  Any left-over expenses can be carried forward to future years.

As an alternative, you might want to ask your employer to enter into a rental contract.  You receive a rental payment each month.  At the end of the year, you record the rental income and associated expenses on your personal income tax return.  If you do this, you will not need a signed T2200 from your employer.

As an employee, can you have 2 offices, one at work and one at home and therefore claim home office expenses?  My answer would be: probably not as you will fail to meet Test 1 described above to obtain the required T2200.

If you run your own business out of your home, you may have a home office from which you are conducting business.  You have to meet 2 tests to be able to claim home office expenses:

1.      The work space is your principal place where you conduct business, and

2.      The work space is used exclusively for business and is used for meeting clients, customers, patients, etc. on a regular and continuous basis.

The deduction for home office expenses is limited to the amount of net business income earned in a year.  Any excess can be carried forward to future years.

As a final note, I have been asked about claiming home office expenses where there is a rental property involved.  Personally, I think you will have trouble meeting the above 2 tests, especially the second one.  Unless you own lots and lots of rental properties that involve significant time and resources, I’m not sure I would go there. 

Sheila Nelson is  a Chartered Accountant and Partner in  Chan Foucher LeFebvre LLP   www.cflca.com  or contact her by e-mail  sheilan@cflca.com  

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