Running a small business from home involves many considerations – but the good news is you may be able to make home-based business tax deductions.
How to make tax deductions for your home-based small business
To qualify, your home must be the principal place of your business – that means more than 50% of your income-producing activities are performed there. That, or your home office must be exclusively used for your business, and used regularly for meetings with clients or customers.
Self-employed business owners, employees, and commissioned sales employees can also make deductions.
To find your business-use-of-home deduction, calculate how much of your home you use for business. If you have a home office, you can usually take the area of your work space and divide it by the total area of your home.
A portion of household expenses that relate to your business directly — like internet, phone, utilities, and cleaning materials — can also be deducted. You may also claim house insurance, property taxes, or rent.
If you operate a part-time business out of your home, expenses must be adjusted accordingly by calculating the hours the work space is used per day, divided by 24 hours. This provides a calculated portion of your total home expenses.
For more information, including what in-the-home expenses you can and cannot deduct, check out CRA’s guidelines for work-space-in-the-home expenses.
Tax season is upon us, and many small businesses owners around Canada are busy getting their financial ducks in a row. At GoForth, we know tax time can be stressful or confusing, so we’ve compiled some tax-related blog posts that will hopefully shed some light on this topic for you.