Home Office Expenses for Self-Employed
How self-employed people claim business use of home, and why to skip CCA on the house.
The short version
- Self-employed people can deduct part of their home costs if the workspace is their principal place of business, or is used only for the business and regularly for meeting clients.
- Unlike employees, the self-employed can include mortgage interest, property tax and home insurance, as well as rent, heat, electricity, water and maintenance.
- Work out the share by area: the workspace divided by the home's total finished area. If the space has personal use too, reduce it by time.
- The claim can't create or increase a business loss. Unused amounts carry forward to next year. It goes on line 9945 of form T2125.
- Skip capital cost allowance on the house. It can cost you part of your principal residence exemption and bring recapture when you sell.
Home Office Deduction for Self-Employed Canadians
Running a business from the house means the house is paying part of the business's bills. The tax system lets you claim that part back, and for the self-employed the rules are friendlier than for employees: mortgage interest and property tax are in. Here's how to calculate it and what not to claim.
Do You Qualify?
One of these must be true:
- It's your principal place of business: where you mainly run the business. A contractor whose office, quotes and books are all done from the spare room usually qualifies, even though the work happens on site.
- You use it only for business, and regularly and continuously meet clients there.
What You Can Include
| Home cost | Self-employed | Employee (for comparison) |
|---|---|---|
| Rent | Yes | Yes |
| Heat, electricity, water | Yes | Yes |
| Maintenance and minor repairs | Yes | Yes |
| Home insurance | Yes | Commission employees only |
| Property tax | Yes | Commission employees only |
| Mortgage interest (not principal) | Yes | No |
| Capital cost allowance on the home | Allowed, but usually a bad idea | No |
Home internet and a business phone line are usually claimed separately as business expenses at their business share, not through the home office percentage. See business expense deductions.
How to Calculate It
- Measure the workspace and the home's total finished area (including hallways, bathrooms and kitchen; not unfinished basements or garages).
- Business share = workspace / total. A 150 sq ft office in a 2,000 sq ft home is 7.5%.
- If the space is also used personally (the dining table), reduce by the share of hours used for business.
- Apply the percentage to the year's eligible costs.
Example: $3,200 heat and hydro, $1,400 insurance, $5,200 property tax, $9,000 mortgage interest, $1,200 maintenance = $20,000. At 7.5%, the deduction is $1,500, which saves roughly $400 to $500 in income tax and CPP at middle incomes (run yours through the self-employed tax calculator, and see how much to save).
What is your home office worth?
Tell the assistant your workspace size, home size, whether you own or rent, and the year's home costs. It works out the deduction and the tax and CPP it saves.
Why to Skip CCA on Your Home
You're allowed to claim capital cost allowance on the business part of your house, but it usually backfires. When you sell, the CCA comes back as recapture, and the business-use part may no longer be fully sheltered by the principal residence exemption. A few hundred dollars a year now can turn into a taxable surprise at the sale. Most accountants say don't. See real estate tax.
The Loss Rule
Home office expenses can't create or increase a business loss. If the business made $1,000 before the home office, the home office claim stops at $1,000, and the rest carries forward to next year. That's why a new business with little income often can't use it right away.
Employees Use Different Rules
If you're an employee working from home, you need a T2200 and the list is shorter; see work from home tax deductions.
Before filing, Return Check checks that your home office claim fits the loss rule and flags percentages CRA tends to question. Line 9945 and the rest of the form are on T2125 explained.
Self-Employed Home Office Questions
Can self-employed people deduct mortgage interest for a home office?
Yes. Self-employed people can include the business share of mortgage interest, property tax, home insurance, utilities and maintenance.
How do I calculate my home office percentage?
Divide the area of the workspace by the total finished area of the home. If the space is also used personally, reduce it further by the share of time used for business.
Can my home office create a business loss?
No. Business-use-of-home expenses can only reduce business income to zero. Unused amounts carry forward to the next year.
Should I claim CCA on my home office?
Usually not. CCA on your home can cause recapture and may reduce the principal residence exemption when you sell.
Where do I claim home office expenses as a self-employed person?
On line 9945 of form T2125, using the business-use-of-home section of the form.
Sources: CRA, Business-use-of-home expenses; Guide T4002. Example figures calculated by us. Checked October 2026.
Last reviewed October 4, 2026 against CRA and Government of Canada sources. How we check our facts.