What a self-employed person can claim for a home office, how an incorporated owner gets the same costs covered, why most owners skip CCA on the home and which records to keep, with every rule linked to the Canada Revenue Agency.
If you are self-employed, you can deduct part of your home costs on Form T2125 when the space is your principal place of business, or when you use it only for the business and meet clients there in person on a regular basis. You claim a reasonable share, usually the office area divided by the home’s finished area, of heat, electricity, insurance, maintenance, property taxes and mortgage interest, or of your rent. The claim cannot create a business loss, and the unused part carries forward. If you are incorporated, the home is yours, not the corporation’s: the corporation can reimburse you as its employee, pay you rent, or sign a Form T2200 so you claim the employee rules on your own return.
Who Can Claim Home Office Expenses as a Self-Employed Person?
The CRA’s business-use-of-home expenses page says a sole proprietor can deduct expenses for a work space in the home if it meets one of two conditions:
- It is your principal place of business. This is your chief or main place of business. The space does not have to be used only for the business, but if the family also uses it, you share the costs between business and personal use.
- You use it only to earn your business income, and you use it on a regular and ongoing basis to meet clients, customers or patients. The CRA reads meeting as meeting in person.
Income Tax Folio S4-F2-C2 gives examples. A building contractor who does the work orders, bookkeeping, ordering and payroll from home, and the jobs at customer sites, has his principal place of business at home, even though his children do homework in the same room in the evening. A lawyer with a rented office who works from home on Fridays and meets clients almost only at the office cannot claim the home space. A doctor who sees an average of five patients a day, five days a week, in a home office meets the second test; one or two patients a week does not.
- Phone, internet and supplies are separate. The folio says the business part of your phone and internet, and supplies such as paper and stamps, are regular business expenses. They do not depend on the home office tests. Our cell phone and internet guide explains how to work out the business share of a plan you also use at home. Business meals have a rule of their own, explained in our meals and entertainment guide.
- Furniture and computers are capital. A desk, chair, printer or computer is deducted over several years through capital cost allowance (CCA). See buying equipment before December 31.
- No rent on a home you own. If you own your home, you cannot deduct a rental value for the office space. Rent is deductible only when you rent the home.
What Home Costs Can You Claim?
“Yes” means the share of the cost that relates to the work space, not the whole bill. The self-employed column is from the CRA’s business-use-of-home expenses page and Folio S4-F2-C2. The employee column is from the CRA’s home office expenses for employees and applies to an incorporated owner who claims as an employee (see below):
| Home cost | Self-employed, Form T2125 | Employee with a T2200 |
|---|---|---|
| Rent, if you rent your home | Yes | Yes |
| Heat, electricity and water | Yes | Yes |
| Maintenance and minor repairs | Yes | Yes |
| Home insurance | Yes | Commission only |
| Property taxes | Yes | Commission only |
| Mortgage interest | Yes | No |
| CCA on the home | Allowed, usually skipped | No |
| Home internet, monthly plan | Business part, as a regular expense | Yes, a reasonable fee |
| Furniture, desk, computer | Through CCA | No |
Salaried employees cannot claim mortgage interest, mortgage principal, internet connection fees, furniture or capital expenses such as new windows, flooring or a furnace. Commission employees who sell goods or negotiate contracts can also claim home insurance and property taxes. A sole proprietor can claim all the costs in the first column, and the folio adds that a mortgage interest claim must meet the normal interest rules for borrowed money.
How Do You Work Out the Amount?
Step 1: the share. The CRA accepts a reasonable basis, such as the area of the work space divided by the total finished area of the home, including hallways, bathrooms and the kitchen. If a room is used for both business and family life, work out how many hours a day it is used for the business, divide by 24 and apply that to the business share. If the business runs only part of the week or year, reduce the claim to match. For example (our numbers, not the CRA’s), a dining room that is 15% of the home and is used for the business 8 hours a day gives a 5% share.
Step 2: the limit. Home office expenses cannot be more than the business’s net income before you deduct them, so they cannot create or increase a loss. What you cannot deduct this year carries forward to next year, with no time limit, as long as the space still meets one of the two conditions and the income is from the same business.
The first is the CRA’s calculation example for Form T2125, Part 7. The second is Example 4 in Folio S4-F2-C2.
10% of the home, $1,480 claimed
- Heat, electricity, insurance, maintenance, mortgage interest, property taxes and water: $13,300 for the year
- The office is 18 of the home’s 180 units of floor area, so the business part is $1,330
- Add $150 carried forward from last year: $1,480, all deductible because the business earned $7,100
$800 claimed, $500 carried forward
- A nail salon in the owner’s basement had $900 of home office expenses carried forward from two loss years
- In year 3 it earns $800 before home office expenses, which are $400 that year
- It deducts $800 and carries $500 forward ($900 plus $400, less $800)
Should You Claim CCA on Your Home?
The CRA lets a sole proprietor claim capital cost allowance on the business part of the home. Its business-use-of-home page also warns that the capital gain and recapture rules apply when you later sell the home.
The reason is the principal residence. Under the CRA’s Guide T4036 and Folio S4-F2-C2, the CRA usually does not treat a home office as a change in use of your principal residence if all of these apply:
- the business use is small next to the use of the home as your residence,
- you make no structural changes to suit the business, and
- you do not claim CCA on the business part.
Claim CCA and the business part is treated as sold and bought back at its market value. When you sell the home, you split the price between the home and the business part and report a capital gain on the business part, plus recapture of the CCA you claimed. For most owners the CCA saved each year is small next to the tax on a gain in the home’s value, which is why most skip it. If you are thinking of claiming it, run the numbers first.
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What If You Are Incorporated?
The home office rules for the self-employed in Folio S4-F2-C2 apply to sole proprietors and partners. Your corporation is a separate taxpayer, and your home belongs to you, not to it, so it has no home costs of its own to deduct. Paying your household bills does not change that. The CRA’s Guide T4130 says a benefit includes a reimbursement of an employee’s personal expense, and that shareholders are generally taxable on benefits they receive from their corporation. So the corporation covers a home office through one of three routes:
The corporation reimburses you
- You pay the bills and give the corporation a claim with detailed receipts
- It repays the costs of your work as its employee
- You do not claim the same costs on your own return
The corporation pays you rent
- You rent the office space to your corporation
- The rent is rental income on your return (Form T776)
- You claim the costs of the rented area against it
You claim as an employee
- The corporation signs Form T2200 for you
- You claim on Form T777 on your own return
- The salaried employee limits apply, and you need a salary
How Does Each Route Work?
Reimbursement. T4130 describes a reimbursement as an amount an employer pays an employee to repay expenses incurred while carrying out the duties of employment, supported by detailed receipts the employee gives the employer. The cost has to be one of your work as an employee, not your personal living costs. The CRA’s employee pages also say you cannot claim on your own return any expense that was or will be reimbursed.
Rent. The CRA’s Guide T4036 says that if you rent out part of the building where you live, you can claim the expenses that relate to the rented area, split on a reasonable basis such as floor area. The rent is income on Form T776. Set the rent at a fair rate, the same as you would charge a tenant you do not know: T4036 says that if you rent to a person you know for less than you would charge someone you do not know, you cannot claim a rental loss. The change in use rules in the CCA section above apply to the rented part too.
Employee claim with Form T2200. Under the CRA’s eligibility rules, you can claim home office expenses as an employee if all of these apply:
- your employer required you to work from home, in writing or verbally (a formal telework arrangement counts),
- you had to pay the work space expenses yourself,
- you worked from home more than 50% of the time for at least four weeks in a row, or you use the space only for work and regularly meet clients there in person, and
- your employer completed and signed Form T2200.
The CRA’s Guide T4044 adds two conditions for a shareholder. The expenses have to be part of your duties as an employee, not as a shareholder, and you have to show you were required to pay them. In both cases you show that employees who are not shareholders, with similar duties at your company or at similar businesses, have comparable expenses. The CRA says a written contract may not be enough on its own. If you meet both conditions, you may sign the T2200 for yourself. You claim on Form T777, the claim cannot create a loss from employment, and an owner paid only dividends has no employment income to claim it against. See salary or dividends.
What Records Should You Keep?
The CRA can ask you to show how you worked out the share, so keep the paper trail with the bills. Employees keep the T2200 and every receipt for six years (CRA, how to claim), the same six years as business records. See how long to keep business records.
- Floor areas: the work space and the home’s total finished area, measured once and kept with the file.
- The bills: heat, electricity, water, insurance, property tax, the mortgage interest statement, or the lease and rent receipts.
- Use: the hours the room is used for work if the family shares it, and a log of in-person client meetings if you rely on that test.
- Incorporated owners: the expense claims and receipts for a reimbursement, the written rent arrangement and the payments, or the signed T2200.
- Carry-forward: the amount you could not deduct last year, to claim this year.
How Can We Help With Home Office Expenses?
For sole proprietors, we prepare your personal return with the business statement (Form T2125) and work out the home office share and the carry-forward each year. For incorporated owners, we help you pick the route that fits how you are paid, set up the paperwork, record it in your books and reflect it in the corporation’s T2 return. Fees are fixed and quoted up front.
If you want to know what your home office is worth on your next return, see our packages.
Frequently Asked Questions
Can I claim a home office if I also rent an office?
Usually not. If the rented office is your principal place of business, the home space qualifies only if you use it just for the business and meet clients there in person on a regular basis. The CRA’s own example is a lawyer who works from home on Fridays and cannot claim the home space.
Can I claim the kitchen table?
If you are self-employed and it is your principal place of business, yes, but only for the hours it is used for the business. Work out the hours a day used for the business, divide by 24 and apply that to the kitchen’s share of the home.
Do video calls count as meeting clients at home?
No. The CRA reads meeting clients, customers or patients as meeting them in person. If you rely on that test, the space must be used only for the business and the in-person meetings must be regular.
What if my business has a loss this year?
Home office expenses cannot create or increase a business loss. The part you cannot deduct carries forward to the next year, with no time limit, and can be used against income from the same business while the space still qualifies.
Can my corporation just pay my home utility bills?
Not as a business expense on its own. The home is yours, and the CRA treats a reimbursement of an employee’s personal expense as a benefit. The corporation can reimburse costs of your work as its employee with receipts, pay you rent for the space, or sign a T2200 so you claim as an employee.
Reviewed on 29 October 2026. Home office conditions, expense lists, limits and examples in this article are from the Canada Revenue Agency, linked beside each fact and listed below. The dining room example is an illustration with our own numbers.
T1 Personal Tax
Personal tax returns, including the business statement and home office claim for self-employed Canadians
T2 Corporate Tax
Corporate tax returns for Canadian corporations, with proactive tax planning and home office costs handled the right way
Sources
- Canada Revenue Agency, Business-use-of-home expenses (page dated 2026-08-31, checked 29 October 2026)
- Canada Revenue Agency, Calculating business-use-of-home expenses (page dated 2026-08-31, checked 29 October 2026)
- Canada Revenue Agency, Income Tax Folio S4-F2-C2, Business Use of Home Expenses (page dated 2018-04-17, checked 29 October 2026)
- Canada Revenue Agency, Home office expenses for employees: Eligibility criteria, Detailed method (page dated 2026-01-20, checked 29 October 2026)
- Canada Revenue Agency, Home office expenses for employees: Expenses you can claim (page dated 2026-01-20, checked 29 October 2026)
- Canada Revenue Agency, Home office expenses for employees: How to claim (page dated 2026-01-20, checked 29 October 2026)
- Canada Revenue Agency, Guide T4044, Employment Expenses 2025 (page dated 2026-01-20, checked 29 October 2026)
- Canada Revenue Agency, Guide T4130, Employers’ Guide, Taxable Benefits and Allowances (page dated 2026-08-17, checked 29 October 2026)
- Canada Revenue Agency, Guide T4036, Rental Income (page dated 2026-03-27, checked 29 October 2026)
