Working From Home: Deductibles for Business Owners

If you run a business, one of the first things you might think about when tax season rolls around is your deductibles. If you run a business from home, there’s even more you can deduct from your taxes, but how do you figure out what’s a deductible and what’s not?

We’re here to help! So what can Canadian business owners deduct from their taxes when they run their business from home?

Property Taxes and Mortgage Interest

When you run a business from home, in many cases you can claim part of your property taxes or mortgage interest on your taxes. According to The Balance Small Businesses, you can deduct these things so long as your workspace follows one of these two guidelines:

• the workspace is your principal place of business; or

• you use the space only to earn your business income, and you use it on a regular and ongoing basis to meet your clients, customers, or patients, according to the CRA.

If you can answer yes to one of these two points, then you’re likely eligible to claim part of your property taxes and mortgage interest on your taxes. 

It’s important to note, though, that you definitely cannot claim the entire amount of it on your taxes. What you can claim is relative to the amount of space in your home that is devoted to your business. The easiest way to do this is to figure out what percentage of the square footage of your house your home office takes up. If it takes up 20% of your house then you can claim 20% of your property taxes and mortgage interest as deductibles. 

Utilities

Yes, you can claim most home utilities as deductibles for your home business, but just like property taxes and mortgage interest, it’s relative to the percentage of space in your house that your home office takes up.

“You can deduct some expenses for heat, electricity, insurance, maintenance, mortgage interest (or rent), property taxes, and “other expenses.” Again, this must be proportionate to the actual space that you are using in your home for your business.” - BDC

Office Expenses

You can even claim little things such as pens, paper, staples, pins, and other office stationery you might need to run your business from home. What you can claim as an office supply entirely depends on your business. If you’re running a home daycare, some cleaning supplies and toys are also deductible. 

“Office expenses do not include capital expenditures to acquire capital property such as calculators, filing cabinets, chairs, and a desk. These are capital items.” - Government of Canada

Vehicle Expenses

Vehicle expenses are a very common thing to claim as deductibles, especially for people running their own businesses. When you run a small business from your home, your personal vehicle probably doubles as your work vehicle as well. You drive it to meetings, to get supplies or any other business-related travel. So claim your car and the expenses related to it, such as gas, insurance, repairs, etc.

Just like many of the things on this list, though, you can’t claim 100% of it. It’s still your personal vehicle that you use for non-business-related things as well.

“An average business tends to write off 50 percent of vehicle expenses so there’s plenty of flexibility depending on your circumstances. Make sure to keep as many receipts as you can to back up any expenses you claim.” - Small Business BC

There’s a lot you can claim as a home business, so when tax season rolls around, make sure you take the time to learn what you can and can’t claim. More often than not, you can claim more than you’d ever expected!

If you don’t run a business from home, but you do work from home, check out this blog to learn what you can claim as deductibles on your taxes!

Did you know that you can claim all these things? Is there anything unexpected that we’re missing on this list? Let us know in the comments below!

If you need some more help figuring this all out or need any other bookkeeping/accounting help, book a discovery call.