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Home Office Expenses

Updated: Jan 20

The deductibility of business expenses that relate to the use of an office or other work space in an individual’s home.

Expenses incurred in earning income from a business are normally deductible in computing income to the extent they are reasonable.

The work space must be used for specified purposes and the expenses deducted relating to that use must not exceed the individual's income from the business for a tax year (computed without reference to certain amounts). To be continued.

Subject to certification by the employer (T2200 Declaration of Conditions of Employment)

Subparagraphs 8(1)(i)(ii) and (iii) allow a taxpayer, in computing income for a taxation year from an office or employment, to deduct amounts paid in the year as expenses for office rent, supplies and salary to an assistant or substitute. These expenses are deductible provided the following requirements are met:

(a) the taxpayer is required by the contract of employment to pay for such office rent or salary, or to provide and pay for such supplies;

(b) the taxpayer has not been reimbursed and is not entitled to reimbursement for such expenses;

(c) these expenses may reasonably be regarded as applicable to the earning of income from the office or employment; and

(d) in the case of supplies, they are consumed directly in the performance of the taxpayer's duties of the office or employment.

Ordinarily, (a) above necessitates that there be an express requirement within the terms of a written contract of employment. Nevertheless, such a requirement for the payment of office rent, supplies or salary to an assistant or substitute may exist where the taxpayer can establish that it was tacitly understood by both parties (the taxpayer and the employer) that such payment was to be made by the taxpayer and was, in fact, necessary under the circumstances to fulfill the duties of the employment.


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Self-Employed Business Expenses

The following may be considered when determining operating expenses: • advertising • allowance on eligible capital property • bad debts • business start-up costs • business tax, fees, licenses and due

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