Canadian Income Tax – Eligbile “Work @ Home Expenses)?
Posted by in MortgageQuestion by Michelle P: Canadian Income Tax – Eligbile “Work @ Home Expenses)?
I am a salaried employee who works from home. Fortunately my company pays for many expenses (company car/gas/insurance, cell phone, home phone, internet). However, we are given T2200 forms each year to deduct a portion of our Electricity/Heat/Water etc. I use the home space inexcess of 50% of the time for my work (so I am eligible for deductions)….it is roughly 3.5% of my total square footage of my house. However, I understand that unless you are a commissioned employee you cannot deduct property taxes etc. I also understand you cannot deduct mortgage “interest”, BUT can I deduct a portion of my mortgage “principle” as it pertains to the ratio of space I occupy for my work? Look forward to your advice, and thank you in advance.
Best answer:
Answer by quizzard123
I don’t have any experience with the whole ‘work at home’ issue, but one thing I can tell you is that you’ve got the mortgage issue backwards.
If anything is deductible, it is the interest on the mortgage, not the principal. Principal is never deductible
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Mortgage principal is not deductible.
Employee work-space-in-home expenses are provided for in subsection 8(3) of the Cdn Income Tax Act. Employees may deduct work-space-in-home expenses if their contract of employment requires them to pay the expenses, and the expenses are not reimbursable by the employer. Canada Revenue Agency (CRA) form T2200, Declaration of Conditions of Employment, should be completed by the employee and employer in order to claim these expenses.
In order for any expenses to be deductible, the work space must be either:
i.the place where the individual mainly does their work, or
ii.used exclusively for earning employment income, and used on a regular and continuous basis for meeting customers or other persons in the course of performing the job.
Allowed expenses include heat, electricity, light bulbs, cleaning materials, maintenance, etc. If the home is rented, a reasonable portion of the rent may be deducted. Mortgage interest and capital cost allowance may not be deducted.
Sales commission employees eligible to deduct work-space-in-home expenses may also deduct a reasonable portion of property taxes and home insurance.
CRA form T777, Statement of Employment Expenses, is used to calculate the amount of the work-space-in-home expenses allowed.
The work-space-in-home expenses can only be used to reduce employment income. They cannot be used to create or increase a loss from employment income. Any expenses in excess of the employment income can be carried forward to be used in the next tax year.
The work-space-in-home expenses will include any GST/HST or provincial sales taxes incurred. You may be eligible for a refund of the GST/HST included in the costs. See Employee and Partner GST/HST rebate on the GST/HST page.
See also:
CRA web page Line 229 Other Employment Expenses
CRA Guide T4044 Employment Expenses
CRA Interpretation Bulletin IT-352 Employee’s Expenses, including work-space-in-home expenses