Workspace in the Home Expenses in Your T1 - Income Tax Return

  1. Home
  2. Blogs
  3. Workspace in the Home Expenses in Your T1 - Income Tax Return

Workspace in the Home Expenses in Your T1 - Income Tax Return

If your contract of employment requires to use your home space for your employment purposes, then you may be eligible to claim certain home expenses which are directly related to your work. You can claim such home office expenses as a deduction from Payroll income to the extent the same is not reimbursed by your employer.

In addition to above you must satisfy one of the following conditions to claim such expenses:

  • You must work at your home cum office for atleast 50% of your time.
  • You use the workspace on a regular basis only for the purpose of work / employment for e.g. meeting with customers, vendors etc.

How to Calculate the Amount of Home Office Expenses

With effect from 2023, the home office expenses can be claimed only applying the detailed method. The simple flat rate method, which was temporarily in place for the years 2020 to 2022, does not apply in the year 2023.

Therefore, you need to properly allocate your home office expenses between your personal use and office use. The CRA has clearly laid down the rules of claiming the home office expenses. You can claim only reasonable proportion of expenses which is attributable to your work. You may claim the following home office expenses by applying the following steps of calculations:

Step 1: Percentage usage of Home space for employment purposes:

First of all, calculate the area / space used for office purposes out of the total area of the house. The size / area of the house used for office purposes must be reasonable as well as calculated by proper measurement. Suppose the total are of the house is 1,000 sq. ft and the home office use area is 200 sq. ft, then the work area / space is 20% of the total area.

Next step is to find out the type of the area, which is used for the employment purposes. The area of the house may be:

  • Designated room, which is used for official purposes only or
  • Common / shared area, is the area which is also used for other purposes like Living room, visitor room etc..

In the case of use of designated area for official purposes allows you to claim the higher amount of home office expenses, as you are using the designated area for office use only throughout the 24 hours (i.e. 24 x7). Therefore, the percentage calculated at above step i.e. 20% shall be used to claim your home office expenses.

On the other hand, in the case of common / shared area for office use, the claim is further limited / restricted to the number of hours use of such common area for the official purposes. Continuing the above example at initial step, suppose the common area (200 sq. ft. i.e. 20%) is used for official purposes for 42 hours in a week out of the total hours of 168 hours in a week (25% = 42/168), so in the case of Common / shared area, the percentage calculated at first point (20%) is further restricted to percentage of total hours used for official purposes i.e. 5% only (25% of 20%).

Further it is also important to note that you can claim the home office expenses only for that part of the year during which you have used your home for office purposes only.

Carry forward of unclaimed home office expenses:

In case your home office expenses are higher than your employment income and you cannot claim home office expenses in full, from your current year employment income, then the same cannot be adjusted against other sources of income. However, the same may be carried forward to the next year and can be claimed as an expense provided you continue your employment with the same employer.

Step 2: Calculate the total eligible (Claimable) Expenses

Once you have calculated the percentage of your home office area, the next step is to sum up all the home expenses and then multiply the same by the percentage you arrived at Step 1 above.

Expenses which can be claimed:

  • Rent
  • Utilities (Heat, Electricity and Water)
  • Internet Expenses excluding connection fee like payment of modem etc.
  • Minor Repair and Maintenance Expenses

The Commission earning employees can claim the following expenses in addition to above expenses:

  • Home Insurance Expenses
  • Property Tax paid for the home
  • Lease payments for Computer / Laptop, Mobil phone etc.

Expenses which are specifically mentioned as non-claimable:

  • Interest and Mortgage payments of the home
  • Capital Expenses like Furniture and Fixtures
  • Major Repairs like Windows or Flooring replacement etc.
  • Other Expenses like Wall Decoration etc

Disclaimer: This article is not exhaustive and does not contain all possible legal rights or remedies. In addition to this, laws may change over the period of time and should be interpreted strictly in the context of particular circumstances such that these materials are not intended to be taken as legal opinion or advice. Readers should consult CRA site for comprehensive information on the above topic.