# Business use of home: claiming a home office when you're self-employed

> When you can deduct home office costs as a self-employed person, which costs count, how to work out the business share, the income limit, and CCA on your home.

- Web page: https://taxnotes.ca/guides/business-use-of-home/
- For: Self-employed · Topic: Self-employment
- Last reviewed: 2026-10-11

If you run your business from home, you can deduct part of what it costs to keep your home, as long as your workspace passes one of two tests. You claim only the business share, and the claim can't be more than the business earned that year. Whatever you can't use carries forward.

This guide is for sole proprietors and partners. If you're an employee working from home, different rules apply: see [working from home](https://taxnotes.ca/guides/working-from-home-expenses/).

## The two tests

Your workspace has to meet at least one of these:

1. **It's your principal place of business**, meaning your main one. A contractor who does the paperwork, ordering and payroll at home and the actual work at customers' sites meets this test. The space can also have personal use, such as the kids doing homework there in the evenings, but you'll reduce your claim for it.
2. **You use it only to earn business income, and you regularly meet clients, customers or patients there.** "Only" means a separate area, such as a room, used for nothing else. The meetings must be in person and happen on a regular and continuous basis: a doctor who sees an average of five patients a day, five days a week, at home meets this test; one who sees one or two a week doesn't.

If your main place of business is somewhere else, such as a rented office, a home office can qualify only under the second test.

## Which costs count

You can deduct the business share of:

- heat, electricity and water
- home insurance
- maintenance, cleaning materials and minor repairs
- property taxes
- mortgage interest
- rent, if you rent your home
- capital cost allowance (CCA) on the home, if you own it (see below)

A repair that relates only to the workspace, such as repainting the office, isn't usually split unless the room also has personal use. A furnace repair serves the whole home, so you claim the business share. Repainting a bedroom generally isn't deductible.

Some costs don't belong in this claim:

- **Rent on a home you own.** If you rent, part of your rent counts. If you own, you can't deduct a rental value for the space.
- **Furniture and equipment.** Desks, chairs, filing cabinets, lamps, computers and printers are capital purchases. You deduct their cost over several years as CCA instead.
- **Phone, internet and office supplies.** These relate to the business, not the workspace, so they're regular business expenses outside the home office limits (business share only). See [what you can deduct](https://taxnotes.ca/guides/what-can-i-deduct/).

If you're registered for the GST/HST and claim an input tax credit for the tax you paid on an expense, deduct the expense without that tax.

## Working out the business share

Use a reasonable basis. The usual one is the area of the workspace divided by the total finished area of your home, counting hallways, bathrooms and the kitchen. An office of 12 square metres in a 120-square-metre home is a 10% business share.

If the space is your principal place of business but is also part of your living space, such as a desk in the family room, reduce the share for personal use. Work out how many hours a day you use it for the business, divide by 24, and multiply by the area share. If the business runs only part of the week or year, reduce the claim again. A desk area that's 20% of your home, used 8 hours a day, five days a week, works out to:

> 20% × (8 ÷ 24) × (5 ÷ 7) = about 4.8% of your eligible home costs

Only the first test allows personal use. A space that qualifies under the second test has to be used only for the business, so there's no personal use to take off.

## The claim can't create a loss

Home office expenses can bring your business income down to zero, but not below. You can't use them to create or increase a business loss. Each year, you deduct the lesser of:

- this year's home office expenses plus any amount carried forward from last year, and
- your net income from the business before these expenses

Say your business earned $3,000 before home costs and your home office share is $4,000. You deduct $3,000 and carry $1,000 forward to next year, as long as the workspace still meets one of the two tests. You must use a carryforward in the first later year the business has income to deduct it from, and only against that same business: if you close one home business and start a different one, it doesn't move to the new business.

## CCA on your home: think first

If you own your home, you can include CCA on the business share of the building in your claim. Land isn't depreciable, so only the building counts; most buildings acquired after 1987 are in Class 1. CCA on the home goes into the home office calculation, so the same income limit applies to it. See [capital cost allowance](https://taxnotes.ca/guides/capital-cost-allowance/) for how CCA works.

The gain on selling your principal residence is usually tax-free under the [principal residence exemption](https://taxnotes.ca/guides/principal-residence-exemption/), and the CRA says claiming CCA on a workspace in your home can have a negative effect on that exemption:

- **No CCA: the whole home usually stays your principal residence.** The CRA's practice is to treat the whole property as your principal residence if the business use is small compared with your use of it as a home, you make no structural changes for the business, and you claim no CCA. You can still deduct the other costs above.
- **CCA: part of the home changes use.** If you start claiming CCA on the business part, the CRA treats that part as sold at its fair market value and bought back when you started using it for the business. When you sell, you split the selling price between the part you lived in and the business part (by area or number of rooms, if reasonable) and report any capital gain on the business part.
- **Recapture.** The CRA says the capital gain and recapture rules apply when you sell a home you claimed CCA on. Recapture means CCA you claimed earlier may have to be added back to your income.

The same change-in-use treatment generally applies if you make structural changes to create separate business premises, such as converting the front of a house into a store. Since March 19, 2019, you may be able to elect that a partial change in use isn't treated as a sale, but you can't claim CCA on the property while the election applies; see the CRA's principal residence page before you decide.

## How to claim

Use the business-use-of-home section of Form T2125, Statement of Business or Professional Activities. It takes off the personal-use part of your costs, adds any CCA on the home and last year's carryforward, and limits the total to your net business income. Expenses you claim there can't be claimed anywhere else on the form.

## What to do

- Decide which test your workspace meets, and whether it also has personal use.
- Measure the workspace and your home's finished area, and note how you worked out the share, including hours for a shared space.
- Keep the bills for every home cost you claim, and track any amount you carry forward; see [keeping records](https://taxnotes.ca/guides/keeping-records/).
- Read the [principal residence exemption](https://taxnotes.ca/guides/principal-residence-exemption/) guide before you claim CCA on a home you own.
- Estimate the effect on your tax with the [income tax calculator](https://taxnotes.ca/calculators/income-tax/).

## Sources

1. [Business-use-of-home expenses](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/completing-form-t2125/business-use-home-expenses.html) (canada.ca)
2. [Calculating business-use-of-home expenses](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/completing-form-t2125/calculating-business-use-home-expenses.html) (canada.ca)
3. [Income Tax Folio S4-F2-C2, Business Use of Home Expenses](https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-4-businesses/series-4-businesses-folio-2-deducting-business-expenses/income-tax-folio-s4-f2-c2-business-use-home-expenses.html) (canada.ca)
4. [Self-employed Business, Professional, Commission, Farming, and Fishing Income: Chapter 3 – Expenses (Guide T4002)](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4002/t4002-5.html) (canada.ca)
5. [Self-employed Business, Professional, Commission, Farming, and Fishing Income: Chapter 4 – Capital cost allowance (Guide T4002)](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4002/t4002-6.html) (canada.ca)
6. [Classes of depreciable property](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/claiming-capital-cost-allowance/classes-depreciable-property.html) (canada.ca)
7. [Principal residence](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12700-capital-gains/principal-residence-other-real-estate.html) (canada.ca)
8. [Income Tax Folio S1-F3-C2, Principal Residence](https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-1-individuals/folio-3-family-unit-issues/income-tax-folio-s1-f3-c2-principal-residence.html) (canada.ca)

Tax figures in this guide come from the TaxNotes.ca rates tables (https://taxnotes.ca/rates/), which cite the Canada Revenue Agency and, for Quebec, Revenu Québec.

Last reviewed: October 11, 2026

How to cite: "Business use of home: claiming a home office when you're self-employed", TaxNotes.ca, last reviewed 2026-10-11, https://taxnotes.ca/guides/business-use-of-home/. For a figure or rule, also cite the official source listed above.

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