Home Business Deductions: What the CRA Allows

Home Business Deductions: What the CRA Allows

Running a business from home can significantly reduce your tax burden through legitimate deductions. Here's what the CRA allows.

Home Office Deduction Methods

Simplified Method: $2 per square foot of dedicated home office space (max 300 sq ft = $600/year). Easy but gives lower deductions.
Detailed Method: Calculate the actual percentage of your home used for business and deduct that portion of all home expenses.

Deductible Home Expenses

Fixed Costs:
• Mortgage interest (not principal)
• Property tax
• Home insurance
• Rent (if renting)

Variable Costs:
• Utilities (electricity, gas, water)
• Internet and phone
• Maintenance and repairs
• Condo fees
• Property depreciation

Important Restrictions

You can ONLY claim home office expenses if you:
• Use a dedicated space regularly for business
• Use it as your principal place of work, OR
• Use it exclusively to meet clients/customers

What You CAN'T Deduct

• Principal residence exemption calculations
• Capital improvements (renovations)
• Expenses that benefit personal use
• Mortgage principal repayment

Documentation Requirements

• Detailed records of home expenses
• Square footage calculations
• Photos of dedicated workspace
• Utility bills and property tax statements

Pro Tip: The detailed method usually gives higher deductions for established home businesses. We can help calculate the most tax-efficient approach for your situation.