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If you run a business from home, you can deduct a share of your home costs, but only when the space is your main place of business or you use it only for work and meet clients there regularly. On a $24,000 year of home costs and an office that takes up 10% of the floor area, that’s a $2,400 deduction. For a self-employed Ontarian earning $50,000, it cuts about $690 from income tax and CPP combined.
Who can claim a home office as a self-employed person
The CRA gives two tests, and you only need to pass one. Either the workspace is your principal place of business, or you use it only to earn business income and you use it on a regular, ongoing basis to meet clients, customers or patients.
Which one fits you? Most freelancers rely on the first. If the work happens at home and nowhere else, the home is your principal place of business. The second test is for people who also see clients there, like a massage therapist with a treatment room off the kitchen.
Employees play by different rules. If you get a T4 and work from home, look for the CRA page on home office expenses for employees instead. The form and the conditions aren’t the same.
Which home costs count
You claim a part of the costs of running the whole home, not the cost of the office alone. The share is whatever is reasonable.
| Cost | Homeowner | Renter |
|---|---|---|
| Heating and electricity | Yes | Yes |
| Home insurance | Yes | Yes |
| Cleaning materials | Yes | Yes |
| Property taxes | Yes | No |
| Mortgage interest (not principal) | Yes | No |
| Rent | No | Yes |
| Capital cost allowance | Allowed, but see below | No |
Source for the table: the CRA’s business-use-of-home expenses page, reviewed September 2026.
How to work out your share
The usual method is floor area. Divide the size of the workspace by the size of the home, then apply that percentage to the total. A 120 square foot office in a 1,200 square foot home is 10%.
The CRA also accepts a time based method for rooms you share with family life. Count the hours a day the room is used for the business, divide by 24, and apply the result to the costs. So a room used for work six hours a day counts for 25% of that room’s share of the costs.
Here’s how the two combine. Say that same 10% room doubles as a spare bedroom and you work in it six hours a day. Its business share is 25% of 10%, which is 2.5%, and on $24,000 of home costs that’s a $600 claim, not $2,400. If the room is yours alone for work, the full 10% applies.
Keep the bills. Nobody sends them in with the return, but you’ll want them if the CRA asks how you got your percentage.
What a $2,400 claim is worth
We ran a simple case through the self-employed tax calculator. Ontario, no other income, net business income of $50,000 before the home claim. Income tax comes to about $5,962 and CPP on both halves about $5,534.
Now take off the $2,400 and enter $47,600 as net income. Income tax drops to about $5,559 and CPP to about $5,248. That’s roughly $403 of tax and $286 of CPP, about $689 in all. So each dollar you deduct is worth close to 29 cents here, not the full dollar. It’s still a few hundred bucks the taxman doesn’t get. Your own result will move with your province and income. The marginal tax rate calculator shows what your next dollar costs you.
Limits and mistakes that cost money
You can’t use the home claim to create or increase a loss. The CRA says the deduction can’t be more than your net income from the business before these expenses. Whatever is left over carries forward to the next fiscal period, as long as you still meet one of the two conditions.
The bigger trap is capital cost allowance. If you claim it on the office part of a home you own, the CRA treats that part differently when you sell. The business share can lose the principal residence exemption and you may face recapture. Most people skip CCA for this reason, and the saving rarely beats the risk. Read our note on what you keep from a home sale before you decide.
Other slips: claiming 100% of a shared room, using the whole home’s costs as the base for an office used three hours a week, and forgetting that the claim goes on line 9945 of form T2125 through Part 7. If you pay instalments, recheck them once the claim changes your income. The tax instalments calculator does that.
What records should you keep?
A tidy folder does most of the work. Keep the utility bills, the home insurance statement, the property tax bill or the lease, and the mortgage interest total from your lender. Add a simple sketch of your floor plan with the measurements written on it, plus a line or two on how many hours a day the room is used for work. The CRA’s general rule is to keep records for at least six years, so don’t clear the folder when the return is filed.
Where this information comes from
The conditions, cost list and limits come from the Canada Revenue Agency‘s pages on business-use-of-home expenses. Tax and CPP figures come from our own engine, which uses 2026 federal and Ontario data. The $24,000 of home costs and the 10% share are examples, not averages.
Frequently asked questions
Can I deduct my home office if I rent?
Yes. A renter can deduct a reasonable share of rent plus heating, electricity and insurance, if the space passes one of the two CRA tests.
How do I split home costs between work and family life?
Use floor area, or use hours of business use divided by 24 for rooms you share. Pick a method that is reasonable and keep your workings.
Can the home office claim put my business into a loss?
No. The deduction can't be more than your net business income before the home expenses. Unused amounts carry forward.
Should I claim capital cost allowance on my home?
Most people don't. It can bring recapture and a taxable gain on the office part when you sell the home.
Where does the claim go on my return?
Part 7 of form T2125 works out the amount, and it is reported on line 9945.
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