Taxes… not the most thrilling topic.
But for Canadians working from home, there are a lot of noteworthy financial tricks that can save you some cash when it comes to home office expenses.
In the aftermath of COVID-19, the way we work has seen a significant shift. Compare the pre-pandemic year of 2016, where only 7.1% of Canadian workers worked from home to the 20.1% of Canadians who worked from home in 2023. For many, daily commutes have been replaced by a short stroll down the hall, and living areas everywhere have become workspaces. Whether you know it or not, your home office can become a potential source of tax savings.
If you want your home office to work harder for you in 2024, keep scrolling.
Write-Offs for Home Office Expenses
Here’s a quick overview of the “need-to-knows” for home office expenses:
Before you go claiming things to your heart’s content, you have to figure out if you’re eligible. In Canada, you can deduct home office expenses if you meet one of the following criteria:
- Principal business operations: Your home workspace is your main place of business.
- Regular use: The space is only used to make business income and for meeting clients, customers, or patients continuously.
If you work from home in Canada, you fall into one of two categories:
- You’re self-employed
- You’re a salaried or commissioned employee
The above tax eligibility applies to business-use-of-home expenses. For more information on home office expenses for employees, visit the CRA.
According to the CRA, these are some of the home office expenses you can potentially write off:
- Internet and phone bills: To make all those Zoom meetings and work calls a bit more bearable, know that a portion of your internet and phone bill can be eligible for deduction.
- Utilities: Heating, electricity, and even water bills can be partially deductible. But remember, it’s not for your entire house–only the portion related to your office counts.
- Insurance and rent: Again, not the entire expense, just the percentage that relates to your workspace.
- Office supplies: Pencils, paper, printer ink, even cleaning supplies. If it’s a necessary expense for your home office, you can usually deduct it.
To calculate how much you can deduct, let’s say your office takes up 250 square feet of your 1,250 square foot home. That means that you can write off 20% of the home office expenses that you’ve incurred over the year.
And just a heads up. While you might think you can write off a new office chair, desk, and computer, you actually can’t–home office expenses like these are depreciable assets and have to be amortized over time under Capital Cost Allowance (CCA).
Ugh, so much jargon. We’ll get more into CCA next.
Home Office Renovations & Repairs
Whether it’s buying new furniture or putting up a wall, creating an effective, comfortable home office often requires an investment to some degree.
So what’s the deal? Can home office renos and redesigns be written off as home office expenses?
For the most part, yes, making improvements to your home office can indeed lead to tax deductions, especially for self-employed people–it just might not be as straightforward as claiming a simple write-off.
Home office renovations are investments that usually add value to your home and therefore are NOT deductible home office expenses in the eyes of the government. They can only be claimed as a CCA in Canada.
(You can tell by the caps that it’s a big but.)
Tax experts typically don’t recommend you claim CCA on your home office reno.
The second you claim CCA for your home office, that space immediately loses its tax-exempt status, meaning that you’ll have to pay capital gains tax on it if and when you sell. And depending on how much money you put into renovating your office, that could mean handing over thousands to the CRA. Yikes.
Moral of the story, if you have plans for a major home office upgrade, keep track of current vs capital expenses and consult with your accountant or financial advisor before tax time.
Unlike renovations, which add value to your home, repairs are usually considered normal maintenance required to keep your space operational. That means that generally speaking, repairs should be deducted as home office expenses. So, while things like putting in a new floor and upgrading windows would be considered renovations, fixing a chip in the floor, painting your office walls, and patching up a window screen can be written off as repairs and maintenance.
Hot tip: If your home office upgrades include making the space more energy efficient, don’t forget to check out the Canada Greener Homes Grant.
What About Commercial Office Redesigns?
For all my corporate office friends, it’s pretty much the same story for you. Anything that adds value to the office–including major renovations, new furniture, and equipment upgrades–needs to be depreciated over time. Touching up drywall dings or replacing a ratty roof tile can be deducted as repairs.
If you’re doing any kind of content creation or having clients at your office, it needs to look the part. Get in touch with Unshelf Design for help creating beautiful (and strategic) backdrops that match your brand.
The lines between work and life continue to blur as more and more of us are working from home. There’s no better time to take advantage of the tax savings that your home office expenses can bring!
Just remember that tax laws can be intricate and are subject to change, so always consult with a tax professional or accountant to ensure you make the most of the deductions available to you.
Cheers to the beautiful home offices of 2024 that are designed to benefit productivity (and pockets) everywhere!
Ready to transform your home office into an oasis of comfort and productivity? Contact Unshelf Design today.