Income Tax Considerations for Employees Working from a Home Office

I am a teleworker who works from my home office.  May I deduct expenses for office supplies used in my home office on my income tax return?

Yes, in some cases.  An employee may deduct amounts paid for supplies against their income tax provided the following requirements are met:

• they are required by the contract of employment to provide and pay for such supplies
• they have not been and will not be reimbursed
• these expenses may reasonably be regarded as applicable to the earning of employment income
• the supplies are consumed directly in the performance of the employee's employment duties

What about other costs related to my home work space, like electricity, heating, or mortgage/rental costs?  May I claim a portion of these costs against my income tax?

Yes. You can deduct expenses paid for the employment use of a work space in your home provided you had to pay for them under your contract of employment, and these are expenses directly related to your work for which you will not be reimbursed.  Also, you must meet one of the following conditions:

• the work space is where you mainly (more than 50% of the time) do your work
• you use the work space only to earn your employment income. You also have to use it on a regular and continuous basis for meeting clients or customers

You can deduct the part of your costs that relates to your work space, such as the cost of electricity, heating, and maintenance. However, you cannot deduct mortgage interest, property taxes, home insurance, or capital cost allowance.

If your office space was in a rented house or apartment where you lived, you may deduct the percentage of the rent as well as any maintenance costs you paid that relates to the work space.

How do I calculate what percentage of my home work space related expenses may be claimed as deductions?  

To calculate the percentage of home work space expenses you can deduct, use a reasonable basis, such as the area of the work space divided by the total area.

For maintenance costs, it may not be appropriate to use a percentage of these costs.  For example, if the expenses you paid (such as cleaning materials or paint) were to maintain a part of the house that was not used as a work space, then you cannot deduct any part of them.  Alternatively, if the expenses you paid were to maintain the work space only, then you may be able to deduct all or most of them.

I notice that my eligibility to deduct home office expenses depends in part on whether I'm required to pay for these expenses under my "contract of employment."  How do I provide evidence to the Canada Revenue Agency that my home office expenses are a part of my contract of employment?

If you are deducting employment expenses, you must ensure your employer completes and signs Canada Revenue Agency form T2200, Declaration of Conditions of Employment.  Employees should provide their employer with ample lead time to complete this form.

Form T2200 confirms the specifics of your home office arrangement for income tax purposes including what expenses you were required to pay for under your contract of employment, whether the employer has or intends to reimburse such expenses, and other details about how often and for what purpose you use your home office.

Note that some or all of the information required to complete form T2200 may be covered in the telework agreement signed by you and your employer.

I'm not sure if some of my home office expenses are tax deductible and what the process is for completing the applicable sections of my income tax return.  Is there an in-house tax expert that can advise me?  Are any other resources available?

The information presented in this document has been summarized from income tax directives published by the Canada Revenue Agency.  However, this information is provided as a general guide only and should not be exclusively relied on for direction regarding deductions on your income tax return.  It is your responsibility to determine if you have eligible deductions and to ensure your tax return is completed properly.

Employees are encouraged to review the following resources from the Canada Revenue Agency website for additional information:

• Income Tax Interpretation Bulletin (IT352R2), Employee Expenses Including Work Space in Home Expenses
• Form 2200, Declaration of Conditions of Employment
• Guide T4044, Employment Expenses

If you have further questions or concerns about this information, or any other issue related to home office related tax deductions, you should follow up with the Canada Revenue Agency.

I've submitted my income tax return but the Canada Revenue Agency has rejected some of my home office expense deductions.  Will my employer act on my behalf to ensure my home office expense deductions are accepted by the CRA?

No.  It is your responsibility to ensure that income tax deductions related to a home office are properly documented, conform to Canada Revenue Agency rules and related tax laws, and to keep any records or receipts necessary to support your tax return.

If you have additional questions regarding home office related deductions, please contact the Canada Revenue Agency.