Claiming Home Office Costs – Plan Carefully for Year End

Can employed and self-employed people claim the same expenses for home offices at tax time? The answer is no. Whether you are employed or self-employed matters; the following checklist can help you determine where your deductions fit.

1. Employees who do not earn commission may claim:
   • utilities;
   • maintenance and repairs, including light bulbs and cleaning supplies; and
   • rent.

2. Commission sales employees can claim:
   • utilities;
   • maintenance and repairs, including light bulbs and cleaning supplies;
   • rent;
   • insurance; and
   • property taxes.

3. Self-employed people can claim:
   • utilities;
   • maintenance and repairs, including light bulbs and cleaning supplies;
   • rent;
   • insurance;
   • property taxes;
   • interest; and
   • capital cost allowance (although this is not a good idea if the home is your principal residence. That’s because CCA claims will compromise the principal residence exemption).

You should also know that home workspace claims are limited to income earned in the year. But the good news is that non-deductible home office expenses may be carried forward (indefinitely) to reduce income from that employer (or business income) in subsequent years.

It’s Your Money. Your Life. It’s important to gather all receipts and keep them on hand for audit after tax season. This includes a completed Form T2200 Declaration of Conditions of Employment, on which the employer certifies that the employee is required to maintain the home office and pay the expenses of operating it. Year end is a good time to chase down both the receipts and your employer’s signature.

Evelyn Jacks is president of Knowledge Bureau and author of 50+ books on tax and personal wealth management. Her newest book Jacks on Tax: 2014 Edition will be available in December. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of the 2014 three day think tank in Horseshoe Bay, Texas Nov 9-12 will be “Think BIG: Find the Sweet Spots in Wealth Management”  Follow Evelyn on Twitter at @EvelynJacks.