More and more people are choosing to work from home and become self-employed. When you think about it, it’s hardly surprising; the freedom to be your own boss, arrange your working life around your home life, and no commute to face in the morning or during the early evening. Of course, by being self-employed and working from home, you also need to be sure that you’re covering your taxation issues properly, otherwise you face missing something important.
You are able to claim back taxes on your office at home if your workplace is where you do the bulk of your business and therefore where you earn your cash from, and provided it is used regularly for meeting people pertaining to your business, e.g. clients, customers, etc. If you don’t fit these descriptions, you are unable to claim tax deductions on your home working space.
How Much Can You Claim?
If you do fit the criteria above, you are able to claim back on a certain amount of the expenses triggered within your home. The amount you can claim depends upon the size of your home and how much of it is used for your business. For instance, if your home office covers around 20% of your home, you are able to claim back 20% for interest on your mortgage, property taxes, insurance, and utility bills.
It’s vital that you are careful when claiming back expenses when working at home, in order to avoid the CRA deciding to audit you. There are several expenses you can’t claim back as part of working for yourself at home, and you can only claim back anything related to your business in a smaller proportion, e.g. depending upon how much of your home it covers, as mentioned above.
Many home workers mistakenly include wrong details on their tax return, falsely thinking that the same rules apply for deductions at home, that apply for regular businesses working from business properties. That isn’t the case. There are more stringiest restrictions in this case, to avoid anything not specifically for the business being claimed back. In addition, if you are working remotely for a specific employer, you are unable to claim anything back for your home office if your employer has already included reimbursement in your pay. In this case, you would be claiming twice and then your return would be looked at extremely carefully by the CRA.
In order to ensure that you’re claiming for what you’re entitled to, and that you’re not mistakenly claiming for something you’re not entitled to, it’s vital that you seek out proper and professional advice on your business finances. Working from home is hard enough, with all manner of distractions coming your way, but not understanding the inner workings and nuances of taxation for home workers can lead you towards difficult waters. Ensure that you employ a high quality accountant, who is experienced in working for self-employed home workers, and you shouldn’t have any issues to face.
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- The Capex Team