Proccounting Inc

If you operate a home based business, you may be able to deduct the costs related to the workspace in your home.

To claim the business-use-of-home expenses, you have to meet one of the following conditions

• The space is your principal place of business, or
• You use the space only to earn your business income, and you use it on a regular and ongoing basis to meet your clients, customers, or patients.

You can deduct a part of expenses such as,

• Heating
• Electricity
• Home insurance
• Mortgage interest
• Property taxes
• Repair and maintenance
• Rent
• Capital costs allowance

To calculate the part you can deduct, use a reasonable basis such as the area of the work space divided by the total area of your home.

It is generally not advisable to claim capital cost allowance on a portion of the home because that portion would then not qualify for the principal-residence exemption when it is ultimately sold.

Claiming 50 percent or more business-use-of-home expense or making major structural alterations to adapt it to business use will trigger a "change in use", resulting in loss of the principal-residence exemption.

The amount you can deduct for business-use-of-home expenses cannot be more than your net income from the business before you deduct these expenses. Any unused amount may then be carried forward and claimed in the subsequent year against related business income.

• Deductible motor vehicle expenses
• Tax deductible business expenses
• General employment expenses