How do I deduct work-in-home expenses under my corporation?

Allan Madan, CA
 Sep 5, 2012
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It’s very common for some small businesses to fully operate out of a room in the house.  If you operate as sole-proprietor you can deduct eligible work in home expenses on your personal tax return (T1). If you’re operating as corporation you can charge it as rent expense, which will reduce your corporation’s taxable income and taxes.

Some common home office expenses are: Rent, repairs and maintenance, supplies, telephone, utilities, home insurance, mortgage interest, and property taxes.

Example:

Bob is operating under 123456 Ontario Inc.  He operates 60% of his business principally out his home office which is 200 square feet. Bob’s total house square footage is 2000 square feet. This space is used exclusively for meeting clients and performing employment duties. Bob encountered the following eligible expenses for the year of 2012:

  1. Repairs and Maintenance: $2500
  2. Utilities – $500
  3. Home Insurance- $2000
  4. Property Taxes – $3500

Bob would calculate his deductible portion as follows:
(200 square feet of work space divided by 2000 total square footage of house = 10%)

Therefore, Bob can charge 10% of the above expenditures to 123456 Ontario Inc. At the end of the year 123456 Ontario Inc shows $850 of rent expense on its financial statements. Bob will write a cheque to himself for this amount.

Disclaimer

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

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