Deduction related to working from home:
The income tax limits the circumstances under which a self employed individual can deducts the costs related to a work space at home. Make sure that the space used exclusively to earn income from a business and on a regular and continuous basis for meeting clients or if it is the individual's principal place of business.
The claim should be based on the proportion space within the home that is used as a workplace. Following are eligible expenses for home office:
ü House taxes
ü Insurance
ü Utilities e.g. hydro, heating cost etc
ü Maintenance
ü Security system
ü Cleaning services
ü Include business storage space in the basement and elsewhere, when determining the proportion of your home used for commercial purposes.
ü A bed-and -breakfast enterprise may qualify as workplace in the home, provided the guest rooms are located inside the owner's home and not in a separate dwelling.
What not to do?
It is not advisable to claim capital cost allowance on a portion of the home because that portion of home would then not be qualify for the principal residence exemption when it is sold. In other word, you may require to pay taxes on the income of office portion of your home at the time of sale.
Claiming 50% or more business use of the home or making major structural alteration to adapt it to business use will trigger a “change in use” resulting in loss of the principal residence exemption.
Limitation:
The amount of home office expenses claim is limited to the business income before deductions for home workplace. However, any unused amount can be carried forward and claimed in the subsequent year against related business income.
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