Working from home is becoming increasingly popular, especially in this digital age. The convenience of working from one’s own space, avoiding commutes, and having flexibility in managing work hours, is something that many people find appealing. However, besides the convenience, there are additional perks of working from home – such as tax deductions!
Remote work can make you eligible for tax deductions which can, in turn, help you reduce your tax bill. However, many remote workers aren’t aware of these deductions or aren’t sure which expenses can be claimed. In this blog, we’ll outline everything you need to know about claiming expenses when working from home, and how to maximize your refunds.
What are Deductible Expenses?
Deductible expenses are the business-related costs that you can claim on your tax returns. In the case of remote work, these are expenses incurred when you conduct work from your home office. These expenses may be for work equipment and supplies, rent or mortgage, and utilities. You can claim these expenses when filing your tax return, and they will be deducted from your taxable income, hence reducing your tax obligation.
What Expenses Can You Claim?
Home Office
If you’re working from home, you can claim a portion of your rent or mortgage payments, as well as other expenses associated with the home office, as a deduction against your taxable income. However, the first step is to determine the space that you use exclusively and regularly for your work. This can be a separate room or a designated area in your house. This space is your home office and can be used in calculating your home-office expenses.
Once you have identified your home office area, you can claim a percentage of your rent, mortgage, and home insurance payments. You can also claim property taxes and maintenance costs if applicable. If you’re a homeowner, you can claim a portion of your home’s depreciation as well.
Equipment and Supplies
It’s common for remote workers to use their own equipment and supplies, such as computers, printers, and internet services, for work purposes. You can claim these expenses as tax deductions when you file your tax return.
However, it’s important to note that you can only claim a portion of these expenses that pertain to your work use. For example, you cannot claim internet services that are also used for personal purposes. Cell phone expenses are also only claimable in the proportion they relate to business use.
Utilities
Working from home can increase your utilities bill, especially if you’re using additional equipment like computers, printers, and lighting. You can claim a portion of these costs as deductions on your tax return. This includes heating, cooling, electricity, and water bills.
Training and Education
If you need to complete courses or undertake training to improve your skillset for your work, you can claim these expenses on your tax return. This includes tuition fees, textbooks, and other relevant expenses.
Tips on Maximizing Your Claimable Expenses
Keep Accurate Records
It’s essential to keep accurate records of expenses that you intend to claim. This includes receipts, bills, and other supporting documents. Having proper documentation will help you identify deductible expenses and ensure that you don’t miss out on any eligible deductions.
Be Aware of Tax Laws
Tax laws and regulations can change regularly. It’s important to stay updated and aware of any changes that might affect your tax liability. Staying informed also enables you to maximize your claimable expenses.
Claim Only Eligible Expenses
It’s essential to claim only eligible expenses. Making a claim for expenses that are not deductible can result in penalties and fines. It is important to note that while the CRA allows you to claim a portion of your expenses, they do not allow you to claim expenses related to your employer-provided work-space in the home, such as furniture or computer equipment.
Conclusion
Working from home has its advantages, including tax deductions. By knowing the expenses that are claimable, you can maximize your refunds and save money on taxes. Remember to keep accurate records, be aware of tax laws, and only claim eligible expenses. If you have any doubts or need further guidance, don’t hesitate to speak with a tax professional.