Hi
I have allowed corp.'s to charge monthly home office rent for owners for home office designated 100% for office work.
Most have only home office space and no other office rental.
Some have hybrid home office space - work at office and home
The amount is substantiated by % of space and costs for audit trail.
Any comments on issues with this?
thank you
I don’t. There has been some previous discussion on this forum about the need for specific legal agreements etc., but I’ve never encountered an issue with CRA on this. (Especially cannot see it now post-COVID WFH being almost the norm.)
Only caveat: no mortgage principal of course.
Anything in the biz name generally fully claimable (eg office phone, internet services). All of mine are registered to my biz and I have home services separately. Some people have separately metered their office spaces for very high electrical usage.
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thank you. always good to verify with others.
If the individual has an office outside of the home, then that individual generally does not meet the qualifying criteria of “regularly meeting with clients” for home-office expense. However, if it is all lumped together under “Rent expense” in the corporation, CRA doesn’t often question it (because they don’t know that it includes both home-office and other rent).
That said, I have seen it investigated and denied a few times. In one case, the individual (a chiropractor, if I remember correctly) - objected, and explained that he regularly sees patients in his home, after hours and on weekends, and after showing proof of that activity, CRA allowed it.
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To be clear, it’s not “your” call to allow it or not - it’s up to the client to decide whether to claim such an expense, and it’s up to CRA to decide whether to “allow” the deduction. However, you do have the right to refuse to file their T2 (or do any work for that client) if you believe their claim is fraudulent or constitutes tax evasion, etc.
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Inherited a client many years ago.
Corp had a retail store location(previously loved items), Shareholder used the garage at their home to improve the Items for Sale, they also used this garage and various parts of the house for storage of said items… as large home and kids grown = lots extra space. Corp had always Claimed a flat rate for use of the home for business purposes. Not an office but work space.
Corp was audited not long after I took over for previous years that I was not involved in. Unfortunately, client was reminded by the auditor that although it was allowable deduction that the home owner needed to claim the rental income on their personal tax return. They had not prior to my taking over.
Obviously, CRA adjusted for it.
If claiming deduction… someone has to claim the income 
Home owner claimed rental income… less the portion of utilities, insurance, etc that related to the dedicated parts of the house. Left a very small amount of income.
Which is why, if the claim is based on the usual “office in home” basis…it’s generally fine, deductible to the corp, and NIL to the homeowner
Which is why you do the calculation (% of relevant expenses based on floor area of office vs floor area of entire home) - and set the rent amount equal to the maximum allowable expenses (as @cheryl stated). Zero net rental income, so no additional tax payable, and thus no incentive for CRA to “force” the taxpayer to report that on their T1. Difficult to calculate on a monthly basis, though - ensure you adjust it appropriately at year-end.
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thank you. i have calculated specifically to room and % of house. this supports the rent charged.
thank you
I have an in home office.
Historically, I’ve claimed a % of the electric bill as a rent expense (among other expenses that are reasonable) on the T2 which is in line with the office sqft vs the whole home.
E.g office sqft is 12% of the house so I claim 12% of electrical bill.
I think my office maybe responsible for more than 12% of the electrical bill between my two monitors, computer (which is never turned off), printer/scanner, shredder, lights, powered sit/stand desk etc.
I don’t think it will make a material difference if I claim closer to my actual usage - 20-30% so I don’t mind sticking to 12% if it would be an issue.
I want to know if I can claim a higher amount (which is closer to reality 20-30%) and if I can what type of notes do I need in the working paper. I do not have a separate meter for the home office.
I like basing it on sqft just to be clear but I’m definitely getting the short end of the stick.
Without a seperate meter… difficult to say what your actual is.
Many households have fridge, mini fridge, garage fridge, deep freezer, washing machine, dryer, dishwasher, hot water tank, vaccuum cleaner, Iron, etc.
Various kitchen appliances such as microwve, kettle, coffee maker, toaster, toaster oven, blender, mixer, air fryer, crockpot, etc
Also have ceiling fans, portable fans, portable heater, baseboard electric heater, mini split or heat pump. TVS, Stereo system, kids computers and electronics, gaming systems, etc
The personal list goes on and on and on.
We all live very different and complex lives.
My life is different than it was 12 years ago when I moved here and I would suggest there are yearly changes.
In my opinion, sq ft is probably the best route to stick with.
Rachel Parlee
(506) 874-3093
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Thank you for your comment.
I tend to agree. The wattage in office electronics is relatively small compared to the wattage of appliances.
My question is why would you want the corporation to claim these utility expenses on the T2 return since they are homeowner expenses, not corporate expenses (the corporation doesn’t own the house but is merely renting space in the house). The corporation pays office rent to the homeowner (you), and then you in turn, claim the utility deductions on your personal T776 to offset the Rental income.
This may not be the case…
However, many years ago, I worked for a firm who told shareholders to claim the full electric instead of rent so they could recoup the taxes charged as ITC.
At the time, it didn’t sit well. It just seemed to be pulled out of thin air.
Fast forward, there is more education… CRA audits… etc… and the old ways do not stand the test of time.
I always advocate bringing rent to equal actual expenses as mentioned by other posters.
In previous post I mentioned, I had a client who had claimed More then the allowed percentage and CRA caught it.
This was for a time period before I was involved. Today, we claim based on sq ft usage.
Of course, always keep calculation so that we can substantiate it would be NIL.