Working from home has a bit of a bad reputation as media types imagine you’re playing with your new puppy rather than actually doing work for ‘The Man’. Given that in many cases, productivity has actually increased in work-from-home situations, employers are actively rethinking their staffs’ working patterns to get more to work (more productively) from home!
You should of course reflect your situation in your tax return as many of the things that you use will be tax deductible. Let’s take a look at these in this article.
Tax Deductibles – Work from Home
The Canada Inland Revenue has published a list of things the office worker can deduct from their income where it comes to working from home.
Essentially you should set up a dedicated office space (as a freelance might), and use it solely for the purpose of home working. If it is the box room or spare bedroom (as long as a sensible size) then you’re able to treat it as an office space.
Expenses you can deduct include:
- Rent
- Heating
- Electricity
- Water
- Home insurance
- Maintenance and minor repair costs
- Internet (but not connection)
Generally you will then count how many rooms are in the property and divide your rent, heating, water, home insurance and energy costs by that figure. If you live in a 12-room house (including bathrooms and hallways) then your office expenses would amount to a month’s average use a year.
Where you are at work on a 8-12 hour day and the kids/partner aren’t using it as well, then you can claim as much as 50% or more of your internet costs.
This soon mounts up, and to some extent you can see why your boss wants you at home as they don’t have to pay so much for keeping you there!
What’s Not Covered
Under the current rules, those who rent their homes get a better deal than those on a mortgage or who own their home. Why? Mortgage payments or interest aren’t covered under the deal.
Connecting the internet isn’t covered and nor are the capital costs of a repair at home. Essentially in your 12-room home the tax man will pay a 12th of the labor of fixing a bust water heater but not the new heater itself.
You should only claim if you are working 50% or more of your time (in this case, 1/24th of your annual home expenses) at home.
The inland revenue also won’t cover furniture. If you need a special desk or chair in the office thanks to a disability then the employer may be persuaded to help you out for working (more productively and cheaply!) at home. Those who don’t ask, never get!
A final note is that your home expenses must not exceed the amount that the employer pays you. You can however roll the expenses over to the next tax year. If you do get too clever the inspectors may red flag you and no one wants a tax inspection – short of the Nazi Gestapo threatening to remove your fingernails to make you admit to spying on them, it’s not an experience that comes highly recommended!
Welcome to the World of Freelancing!
For those who have long worked for someone else, envious of those who seem to enjoy life more having multiple clients and working their own hours, here’s your taste. Saving on household bills is a nice perk when you’re working from home. If you like it, then maybe forego your pension and holiday pay and take the leap into full time freelancing? (Hang on – forego those things?! Many do!)
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