(NC)–Many self-employed Canadians now work out of their homes, and if you are among that rapidly burgeoning population, you are probably aware that you can deduct a portion of your home office expenses. While it can be a bonus to deduct some of your household expenses, you must be sure to follow the specific rules that have been set out by Canada Customs and Revenue Agency or CCRA, more commonly known as Revenue Canada.
Here are some rules for determining home office expenses:
• Expenses must relate to work space that is either your principal place of business or used exclusively for the purpose of earning income from the business. For the second criterion to apply, the space must also be used on a regular and continuous basis for meeting clients, customers or patients. Setting up a computer and a filing cabinet in a corner of the living room may NOT entitle you to claim home office expenses. Be sure to check with your professional tax adviser.
• Home office expenses can only be deducted from the business carried on in the home and cannot be used to create a business loss. Eligible expenses that you cannot use in the year they are incurred can be carried forward to subsequent years and deducted from income generated from the business at that time.
• In general, it’s not a good idea to claim depreciation on the portion of your home used for business purposes, as there may be tax implications if you ever sell your home. By not claiming depreciation, your entire house may be regarded as your principal residence–that way any gain realized on the eventual sale of your house may be tax-free.
Excerpted with permission from Smart Tax Tips by Grant Thornton LLP, a leading Canadian firm of chartered accountants, management consultants and business advisers. For more information log on to www.GrantThornton.ca
- News Canada
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