Business-Use-of-Home Expenses (Canada)

MyCarTracks_support · May 15, 2026, 10:44am

For business-use-of-home expenses in Canada, you first need to meet the workspace test from the Canada Revenue Agency (CRA), the federal tax agency. The CRA’s business-use-of-home expenses guidance says you can deduct expenses for a workspace in your home if it is your principal place of business, or if you use the space only to earn business income and use it regularly and continuously to meet clients, customers, or patients.

Once you qualify, the deduction is usually a business-use percentage of eligible home costs. If the space is also used personally, you need both an area calculation and a time-use calculation. You also cannot use business-use-of-home expenses to create or increase a business loss.

This article is educational and is not tax, legal, accounting, GST/HST, the sales tax many Canadian businesses collect from customers and send to the government, Quebec sales tax (QST), payroll, real-estate, or provincial tax advice. Home workspace claims can affect your business income, records, GST/HST input tax credits (ITCs), capital cost allowance (CCA), capital-gain or recapture risk, lease facts, and provincial treatment. Ask an accountant before claiming a large workspace amount or CCA on your home.

Quick answer

Business-use-of-home expenses in Canada can include the business part of costs such as heat, electricity, home insurance, cleaning materials, property taxes, mortgage interest, rent, and CCA when the CRA conditions are met. Use a reasonable basis, usually workspace area divided by total home area. If the same space is used personally, multiply the area result by the business-use time and reduce it again if the business operates only part of the week or year.

Claim the eligible amount in the business-use-of-home calculation on Form T2125, the business income and expenses form, Part 7, and do not claim the same cost elsewhere on Form T2125. The amount you deduct cannot be more than net income from the business before business-use-of-home expenses. Unused eligible amounts can be carried forward if the conditions continue to be met.

Business-use-of-home expenses in Canada

You need one of these conditions:

your home workspace is your principal place of business
you use the workspace only to earn business income, and you use it regularly and continuously to meet clients, customers, or patients

Working at home occasionally is not enough by itself. A dining table used for personal meals, occasional admin, and family activity needs a careful shared-space calculation and may fail the “used only” client-meeting condition unless the principal-place-of-business test applies.

Keep records showing why the workspace qualifies: business address, appointment records, client meeting logs, work schedule, photos or floor plan, lease or ownership documents, and notes explaining how the business uses the space.

Expenses you may be able to include

Eligible costs depend on whether you own or rent and whether the cost relates to the workspace.

Common home costs to review include:

heat
electricity
home insurance
cleaning materials
maintenance and repairs related to the home
property taxes
mortgage interest
rent
CCA, only after reviewing the capital-gain and recapture risk

Do not include personal costs, principal mortgage repayments, or amounts already claimed somewhere else. If a repair only benefits a personal area, exclude it. If a repair benefits the whole home, apply the business-use percentage. If a repair benefits only the workspace, keep records explaining why it was workspace-specific.

How to calculate the workspace percentage

Start with the area calculation:

workspace area / total finished home area = workspace area percentage

For example, if your workspace is 120 square feet and your home is 1,200 square feet, the area percentage is 10%.

If the space is used only for business and qualifies, the area percentage may be the starting business-use percentage. If the space is shared with personal use, add the time calculation:

business-use hours per day / 24 = time-use percentage
area percentage x time-use percentage = business-use percentage

For example, if the 10% workspace is used for business 8 hours per day and personal use the rest of the time, the shared-space percentage is 10% x 8/24, or 3.33%. If the business uses the room only three days per week or only part of the year, reduce the claim again.

The net-income limit

Business-use-of-home expenses cannot create or increase a business loss. CRA guidance says the amount you can deduct cannot be more than your net income from the business before deducting these expenses.

You can deduct the lesser of:

unused business-use-of-home amounts carried forward from the previous year plus current-year eligible business-use-of-home expenses
the amount of net income after adjustments

If eligible expenses are limited this year, you may be able to carry the unused amount into the next fiscal period, as long as you meet the business-use-of-home conditions in that later period.

Form T2125 and line 9945

For self-employed business or professional income, complete the business-use-of-home calculation on Form T2125, Part 7. The expenses claimed on line 9945 cannot have been claimed elsewhere on Form T2125.

Keep a worksheet that shows:

total home costs by category
workspace area
total home area
business-use hours for shared space
number of business days or months, if not the full year
business-use percentage
current-year claim
amount carried forward

If you have more than one business, rental activity, employment workspace claim, or corporation reimbursement arrangement, get advice before reusing the same home costs.

CCA and capital-gain caution

CCA may be available for the business-use part of a home, but it can create later tax consequences. CRA guidance warns that capital gain and recapture rules will apply if you deduct CCA on the business-use part of your home and later sell the home.

Many small businesses avoid CCA on a home workspace unless an accountant has reviewed the long-term consequences. Mortgage interest and property taxes are different from CCA, but they still need a business-use calculation and records.

Records to keep

Keep the workspace file with your annual business records. Useful records include:

floor plan or room measurements
total home area calculation
photos or notes showing the workspace
business calendar or appointment records
utility bills
rent receipts or lease
mortgage interest statement
property tax bill
home insurance
repair and cleaning invoices
T2125 Part 7 worksheet
carried-forward amount from the prior year

Use How Long to Keep Business Records (Canada) for retention and electronic record rules.

GST/HST and home workspace costs

If you are a GST/HST registrant, home workspace costs may also raise ITC questions. Do not assume every home cost creates an ITC. You need registrant status, commercial-activity use, GST/HST paid or payable, sufficient documentation, and a time-limit review.

Use GST/HST for Self-Employed People and Small Businesses (Canada) for the GST/HST workflow. Keep GST/HST support separate from the income-tax business-use calculation so you do not double count.

MyCarTracks workflow

Business-use-of-home records usually sit beside other mixed-use records, especially vehicle use for client visits, job sites, errands, or deliveries. MyCarTracks automatic mileage tracking can capture trips, help separate business and personal kilometres, and export vehicle reports for the same tax-year file you keep with your workspace calculation.

The app does not decide whether your home workspace qualifies or calculate Form T2125 line 9945. It helps keep the kilometre-log side of the business record clean when home-office and vehicle claims both need support.

FAQ

Can I claim business-use-of-home expenses if I work from my kitchen table?

Maybe, but only if the CRA conditions are met and the shared-space calculation is reasonable. You need to consider whether the space is your principal place of business or is used only to earn business income and regularly and continuously to meet clients, customers, or patients.

What home expenses can I claim?

Potential categories include the business part of heat, electricity, insurance, cleaning materials, property taxes, mortgage interest, rent, and CCA. The exact claim depends on your facts and records.

Can business-use-of-home expenses create a loss?

No. The deduction cannot be more than net income from the business before business-use-of-home expenses. Eligible unused amounts may be carried forward if the conditions continue to be met.

Do I need a dedicated room?

Not always. A shared space may qualify when the facts support it, but you need an area and time-use calculation. A dedicated space can make the calculation and records easier.

Should I claim CCA on my home office?

Do not claim CCA casually. If you deduct CCA on the business-use part of your home, capital gain and recapture rules can apply when you later sell the home.