6 Home Based Business Tax Deductions You Don’t Want to Miss
An advantage of having a home-based business or home office is that there are additional income tax deductions that can be claimed. Here is a list of some common home-based business tax deductions that you can consider when filing your next tax return.
- Automobile Expenses – In addition to the normal deductions such as gas and oil, licensing, insurance, maintenance, and repairs, you can also deduct interest on any amounts borrowed to buy an automobile or passenger vehicle to be used to earn income. Keep in mind, these deductions will be based on the amount traveled to earn business income.
- Insurance – Home-based insurance qualifies as a tax deduction, just like any other commercial insurance premiums. A portion of the cost of home insurance may also be written off if your home-based business meets the conditions for claiming business-use-of-home.
- Office Expenses – Make sure to distinguish between office expenses and depreciable assets. Things like office supplies which include, pens, stamps, paper clips, etc would be considered an office expense. Things like filing cabinets, printers, furniture, etc, would be considered as depreciable assets and fall under the rules of Capital Cost Allowance.
- Mortgage Interest and Property Taxes – If you have a mortgage on your home, and have a home office, you can claim the mortgage interest under the Business-use-of-home expenses rules.
- Other Business-Use-of-Home Expenses – These include heat, electricity, water, maintenance, telephone, and internet connection. A portion of these costs can be allocated to your business and claimed as a business expense, provided your home office meets the criteria for business-use-of-home deductions.
- Carry Forward of Unused Work Space in Home Expenses-If you have more expenses than income for your home-based business, you will have what CRA calls unused Work Space in Home Expenses. These amounts can be carried forward into next year, to be used against business income.
The COVID-19 Pandemic has caused many people including small business owners to work from home. This will be a new but welcomed benefit for many. To support your deductions, we encourage you to keep your documents organize and available for review. If you have questions be sure to contact Williamson Accounting: (416) 444-8747