The home office deduction
You run the business from a spare room, the garage, or a shop at the back of the property. A share of what it costs to keep that space is deductible — if you claim it the way the CRA actually allows.
The percentage-of-home method
The deduction is a share of your real home costs, and the share is normally based on floor area. Measure the dedicated business space, divide by your home's total finished area, and that percentage is what you apply to eligible costs.
Say your shop and office take up 12% of the house. You can deduct 12% of heat, hydro, water, home insurance, maintenance — and, if you own, 12% of the mortgage interest (never the principal). Renters use 12% of rent instead.
The line that keeps you safe: the space should be a genuine, identifiable work area — a real office, a real shop — used regularly and mainly for the business. A dedicated room is a strong claim. "I sometimes do invoices on the couch" is not.
The loss rule people miss
Home workspace costs can't push your business into a loss. If they're bigger than your income this year, the leftover carries forward — you claim it in a later year with income to cover it. So a slow year doesn't burn the deduction; it defers it.
Where this lands on your bill
Home office is rarely the biggest deduction, but it's steady, recurring, and completely legitimate — the kind of thing that quietly lowers your net income every single year. Add your realistic home-office share to your other expenses in the calculator to see the effect.
Common questions
How much of my home can I deduct?
You deduct the business-use percentage of your home costs, usually calculated by floor area. If a dedicated office or shop is 12% of your home's square footage, you can generally deduct 12% of eligible home costs — heat, hydro, home insurance, maintenance, and a portion of rent or mortgage interest (not the mortgage principal).
What home costs qualify?
Heat, electricity, water, home insurance, cleaning and maintenance, and property tax — all at the business-use percentage. Renters can include rent. Homeowners can include mortgage interest (not principal) and, with care, a portion of property tax. The full mortgage payment is never deductible.
Does the space have to be used only for business?
For a self-employed home workspace, the CRA generally wants it to be either your principal place of business, or a space used exclusively for the business and regularly to meet clients. A dedicated office or shop is the cleanest claim. A corner of the kitchen table is a much weaker one.
Can a home office deduction create a loss?
No — home workspace expenses can't be used to create or increase a business loss. If they exceed your income for the year, the unused portion carries forward to a future year when you have income to apply it against. Nothing is wasted; it just waits.