If you work from a room in your home, part of what the home costs you each year can come off your business income. This is not a single receipt you file — it is a calculation. You take costs you were already paying, work out the share that belongs to the workspace, and carry that share to line 9945.
On Form T2125, Statement of Business or Professional Activities, the working lives in Part 7, "Calculation of business-use-of-home expenses". Business use of home is the one part of the form where the amount is built rather than copied.
When a workspace qualifies
You can deduct expenses for the business use of a workspace in your home as long as you meet one of these conditions:
- the workspace is your principal place of business, or
- you use the space only to earn your business income, and you use it on a regular and ongoing basis to meet your clients, customers, or patients
One condition is enough. Both are about the space itself, not about how much you earn in it.
What the home costs that you can share
You can deduct part of your maintenance costs, such as heating, home insurance, electricity, and cleaning materials. You can also deduct part of your property taxes, mortgage interest, and capital cost allowance (CCA) — CCA being the way the cost of a lasting asset comes off over the years you own it rather than all at once.
If you rent your home, you can deduct the part of the rent and any expenses you incur that relate to the workspace.
Finding the business part
To calculate the part you can deduct, use a reasonable basis. The CRA's own example is the area of the workspace divided by the total area of your home.
If you use part of your home for both your business and personal living, there is a second step. Work out how many hours in the day you use those rooms for your business, divide that by the hours in a day, and multiply the result by the business part of your total home expenses. That gives you the household cost you can deduct.
If you run the business for only part of the week or part of the year, reduce your claim accordingly.
Nothing on an electricity bill or a rent receipt tells you which share is yours. The measurement does. Write it down while you still remember how you took it — that is what makes the figure reproducible when you file.
The limit, and what carries forward
The amount you can deduct for business-use-of-home expenses cannot be more than your net income from the business before you deduct these expenses. In other words, you cannot use these expenses to increase or create a business loss.
You deduct the lesser of two amounts: any amount you carried forward from the previous year plus the business-use-of-home expenses you incur in the current year, or the amount of net income (loss) after adjustments.
An expense you could not deduct this year is not lost. In your next fiscal period you can use it, as long as you still meet one of the two conditions above, and the same rules apply again.
One more restriction: the expenses you claim on line 9945 cannot have been claimed elsewhere on Form T2125. A cost belongs in one place on the form.
If you claim CCA on your home
The CRA states the consequence plainly. If you deduct CCA on the business-use part of your home and you later sell your home, the capital gain and recapture rules will apply.
That is a consequence to weigh before you claim it, not a reason on its own to claim or not claim. The CRA's page and Income Tax Folio S4-F2-C2, Business Use of Home Expenses set out how those rules work.
What to keep
Keep the bill behind every home cost you share out: heating, electricity, home insurance, property taxes, your mortgage interest statements, and your rent receipts if you rent. Each one supports the full amount before the business share is taken.
Keep the measurement too. Record the basis you used — the workspace area over the total area of your home, and the hours per day if the room does double duty — so the calculation can be reproduced later without measuring the house again.
Dossier tags these documents as they arrive and keeps them together, so the year's evidence is in one place when you file. The share itself is arithmetic over your whole year rather than anything printed on a bill, so it is settled when you file.
Official CRA sources
Source: Canada Revenue Agency (canada.ca). Not tax advice.