Whether you were an early adopter of working from home or uprooted from your usual office space earlier this year, working from home is certainly an adjustment from office life. It means no small talk at the water cooler and no potluck Fridays, but on the flip side, it also means no formal dress code or stressful rush hour commutes.
Another change to keep in mind is the idea of writing off things in your home as a business expense. Similar to the way your company pays for office expenses, you can deduct expenses you paid for the employment use of a workspace in your own home.
Let’s look at this idea a little more closely and determine what exactly can be written off on your taxes if you work from home.
To deduct expenses you paid for the use of a workspace in your home, you must meet one of the following conditions:
The workspace is where you mainly (more than 50% of the time) do your work.
You use the workspace only to earn your employment income. You also have to use it on a regular and continuous basis for meeting clients, customers, or other people in the course of your employment duties.
You can deduct the part of your costs that relates to your work space, such as:
Maintenance (cleaning, minor repairs)
Additionally, these relative costs can differ depending whether you’re self-employed, a freelancer or a work from home employee (for example, only self-employed individuals can deduct mortgage interest or capital cost allowance).
To calculate the percentage of workspace-in-the-home expenses you can deduct, use a reasonable basis, such as the area of the work space divided by the total finished area (including hallways, bathrooms, kitchens, etc.). However, if this is a common area, you must also keep in mind the percentage of time you spend on work versus personal time.
For example, if the workspace area is 20% of the total floor space of the home, but the use of the work space is 80% employment and 20% personal, then 16% (i.e., 80% of 20%) of the total hydro bill for the home would be the amount of hydro that is otherwise deductible.
If your employer gives you a working-from-home allowance or has reimbursed you for any expenses, you cannot also write them off on your taxes.
Capital expenses are not covered. This means the sleek new MacBook Pro or the hydraulic standing desk you bought are not deductible expenses.
Even if you’re not certain you can write something off on your taxes, be sure to save receipts and keep track of all expenses incurred while working from home so that you can easily claim them, if permitted.
If you’re still unsure about what exactly can be written off on your taxes, working with an accountant can help answer any questions you might have about your specific business or circumstances.