Due to the coronavirus pandemic, more people than ever are working from home. And a lot of people are running their own businesses or freelancing from the comfort of home. If you are self-employed, it can often be a challenge to get a handle on your finances in a professional capacity, and this is something you need to try to make the most of.
Statistics suggest close to 3 million Canadians are self-employed, and this number is surely going to grow significantly in the wake of coronavirus. So, for those working from home, for themselves, it is important to make sure you know what expenses you face, and what you might be eligible to claim back.
Rules for claiming expenses on your home office
If you want to claim expenses on your home office, there are certain caveats you need to be aware of. Come on, you didn’t think it was going to be that easy, did you?! There are two conditions under which you can claim your home office when self-employed, and they are:
- The office must be your principal place of business or used solely for the purpose of making money from business.
- It should be used on a regular basis for hosting meetings or client interactions.
Now, one of the things to consider is the fact that you need to make sure you are realistic about the size of your office when claiming. We’ll talk about this in a little more detail later on.
Tax deductibles you need to know about
There are also certain tax deductibles that you need to be aware of when it comes to home office expenses for the self-employed. Not everything you might think is covered actually is, and this means you need to be aware of what you can and can’t claim back. First off, if your office qualifies for tax deduction (see above), then you can claim a percentage of household expenses, such as utilities and property tax. The percentage of this depends on the percentage of your home that the office space takes up, and this is something you may wish to discuss further by getting in touch with us!
Now, there are also certain materials that you might use in relation to your home office that are also tax deductible. According to the CRA, these include things like pens, pencils, stationery, and stamps, however it is worth noting that things like furniture, filing cabinets, and desks are not counted as these are capital expenses.
Sidebar – you can claim cleaning services as well, so be sure to make the most of this!
Mistakes you should avoid
You also need to be aware that there are mistakes that self-employed Canadians often make when claiming home office expenses. First of all, don’t necessarily assume things have changed for the self-employed because of coronavirus. For the most part, the indications from the CRA seem to be that things are more or less the same. These are some of the core mistakes you need to avoid:
- Forgetting that the principal part of mortgage payments isn’t deductible
- Claiming % of home repairs that have nothing to do with your home office
- Rounding up on expenses
- Not breaking down your expenses into different categories
The process of claiming things as tax-deductible and saving on home office expenses as a self-employed Canadian be overwhelming, but that’s why we are here! Get in touch with us today and we can help you through this process in a stress-free way.
Related Tag: Business Accountants