Can I Write Off My House?
Some of the most common questions that we get from self-employed clients are around what expenses can be claimed for using your home in the business. You can definitely claim a proportionate amount of expenses related to the house, but you will want to be sure to make the calculation easy for CRA to understand.
Any business-use-of-home expenses you claim are based on the area used for the business, as a proportion of the total area of the house. Our advice to clients is always to make this easy to defend and explain to CRA if they ever question it. For example, if you have one room that is dedicated as an office, and there are ten rooms in the house, claim 1/10th of the costs (similarly, you can determine the business-use ration using square footage).
Even if there are other areas of your home that are *sometimes* used for the business (you occasionally meet clients in the dining room, sometimes they use the bathroom, etc.), any small incremental gain you might get in how much you write off (and how much tax that saves) isn’t usually worth the potential hassle of arguing with CRA over it. We suggest using proportions for spaces which are pretty much dedicated to the business most of the time, and not being overly aggressive in trying to claim absolutely every small proportion of the house which may get used for the business.
Whatever percentage you come up with, then, is applied to all of the operating expenses of the house for that year: insurance, utilities, property tax, mortgage interest, maintenance, etc. We recommend never depreciating the actual house itself as a business expense, as it impacts your otherwise tax-free sale later on as your principle place of residence.
When your business-use-of-home expenses are greater than your net business income, you can only apply them enough to get your business to a breakeven, and not create a loss. But, you can carry forward any unused amounts to deduct in future years when the profit may be higher, along with that year’s share of house expenses. So, even if your business has a small profit or a loss that means you don’t *need* the write-off for home expenses that year, it is still best to claim them so they carry forward.
So, yes, it is definitely possible, and is something you will want to take advantage of! We help our clients determine what percentage to claim so that they're provided with as much benefit as possible without causing potential issues with CRA.