Apr 4, 2016
Tax perks for the home office and self employed
By Dale Jackson
Tax perks for home office and self-employed
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ANALYSIS: There’s a certain breed of Canadian that opts to strike out on their own and work from home. One reward for that level of self-reliance are a few tax perks that could keep more of that hard earned cash in your pocket.
The tax perks apply to two types of people: one is an employee who works for someone else from home. The other is a self-employed individual who works from home.
Before you start counting up the deductions it’s important to determine how much of your home is considered your work area. Technically, you need to measure the square footage of your home and the square footage of your work area.
One simpler way recommended by many tax experts is the one-fifth rule, since most work areas take up about 20 percent of the house. In that case, 20 percent of the home expenses can be applied against your income.
Tim Cestnick from WaterStreet Group has compiled a list of the most common deductions for those who work from home, along with deductions for vehicles required for work.
1. Tax breaks from a home office
a. Employees: If your employer requires you to have an office at home and it is your principal place of work, or you use your home for regularly meeting clients/customers, then you can claim expenses related to your home office. Deductible expenses include a portion of utilities, repairs, insurance (but do not include mortgage interest or property taxes).
b. Self-employed: You can deduct a portion of home expenses if it is your principal place of business or you regularly meet clients/customers there. You deduct the same things as listed for employees above, but can add a portion of mortgage interest and property taxes to that list.
2. Tax breaks from using your car
a. Employees: You can deduct a portion of vehicle expenses if you’re required to use your own vehicle for work. That included a portion of: gas and oil, repairs, maintenance (even car washes), insurance, license fees, capital cost allowance (depreciation), auto club dues, loan interest, and more. Your employer must sign Form T2200 to verify that use of vehicle was necessary.
b. Self-employed: It’s the same as deductions for an employee, but there is no requirement for your employer to verify that the use of your car was necessary.
