Home Office Expenses Mortgage

Your deduction would be 2 000 meaning that you have just saved 2 000 by claiming a home office expense deduction. These expenses may include mortgage interest insurance utilities repairs and depreciation. So if your home office was a 10 10 room the square footage of would be 100.

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Self employed individuals and qualified employees can claim expenses associated with having a home office.

Home office expenses mortgage. First determine if your workspace qualifies and then look at which expenses you can claim. Because mortgage interest and real estate taxes are deductible without regard to the home office deduction the real advantage of the home office deduction for homeowners is that it converts an itemized deduction into a far more tax advantaged business expense deduction. The canada revenue agency allows you to deduct business use of home or workspace in the home expenses from your income lowering your taxable income and reducing your tax burden. Unrelated home expenses such as lawn care or painting a room other than your office are not deductible for your home office.

Utilities and mortgage interest are examples of indirect expenses. You can also deduct expenses related to your home office. The amount you can deduct for work space in the home expenses is limited to the amount of employment income remaining after all other employment expenses have been deducted. Linus uses his home office including the desk and chair for both work and private purposes.

To calculate the percentage of work space in the home expenses you can deduct use a reasonable basis such as the area of the work space divided by the total finished area including hallways bathrooms kitchens etc. Indirect home office expenses relate to the house that the office is inside and are only partially deductible. When completing his tax return linus usually claims his home office expenses using the fixed rate method. For example let s say your total allowable indirect home expenses for your whole home are 20 000 for a specific year and your home office space is 10 of your home for business purposes.

He works out that his private use is 10. If your office space is in a rented house or apartment where you live deduct the percentage of the rent and any maintenance costs you paid that relate to the work space. However you cannot deduct mortgage interest property taxes home insurance or capital cost allowance. For example if your home office takes up 10 percent of the square footage of your home you can claim 10 percent of utilities insurance property tax and mortgage interest.

If your home office qualifies for the tax deduction you can claim a portion of your household expenses. He keeps the required records to show how he calculates his claim. In this case you would get to deduct 6 7 of your home office expenses by multiplying that percentage by eligible home expenses like mortgage interest or monthly rent utilities interest and. If your entire home was 1 500 square feet you would divide 100 by 1 500.

Taxpayers using the regular method required for tax years 2012 and prior instead of the optional method must determine the actual expenses of their home office.