If You Operate a Home-Based Business, the Canada Revenue Agency

question 98

Short Answer

If you operate a home-based business, the Canada Revenue Agency (CRA) will usually allow you to report certain "office-in-home" expenses. The portion of heat, insurance, electricity, property taxes, and mortgage interest that you may report must be (in the language of the CRA) "reasonable under the circumstances." Rose uses 2 of the 11 rooms in her home for her real estate appraisal business. The combined floor area of the 2 rooms is 36 m². The remainder of the house has an area of 147 m². Rose's total expenses in the home-related categories were $17,512 for the year. What amount will qualify as "office-in-home" expenses if the proration is based on:
a) The number of rooms used for the business?
b) The floor area devoted to business use?

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Definitions:

Salvage Value

The estimated residual value of an asset after its useful life has ended and it can no longer be used for its intended purpose.

Useful Life

It's the expected period over which an asset is considered usable and economically efficient for its intended purpose.

Revenue Expenditures

Outlays that are immediately charged against revenues in the period they occur, often related to the maintenance or repair of assets.

Accumulated Depreciation

Represents the total depreciation expense allocated to a tangible asset since it was put into use, reducing its book value on the balance sheet.