Incorporated Business
Home Office Expenses

by Tania
(Belledun, NB Canada)

This is my first time posting but not my first visit. :D love the site!

I have a question:

I have a client who didn't take a paycheck or draws out of his incorporated business and wants to claim his home office expense.

When I put the numbers in the software for his personal T1 it tells me that his allowable is 0 and delete the form (T777).

I'm not sure if he needs to claim this on his T2 or how to go about doing this. This is a first for me because most of the time the business owner had some kind of income from his/her business. I don't do corporate tax returns and only personal so this is confusing to me.

Thank you so much for any answers you can give me.

Tania



image of fancy scroll lines



Hi Tania,

I am delighted that you like my site ... and that you are asking a question ... and a good question at that.

Back in March, I had a similar question on how to claim home office expenses if you have an incorporated business. I found out it is not a black and white answer ... like for sole proprietors ... but rather a gray area.

All the information I pulled together can be found at Home Office Expenses for Corporations.

I think that whoever prepares his T2 should be addressing how to claim the home office expenses ... but you can make up your own mind after you read through the information I was able to gather.

If you are also doing the books for the corporation, the information Nancy presented seems to be a common method of handling home office expenses for corporations by CAs.

Comments for Incorporated Business
Home Office Expenses

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May 03, 2010
Home Office Expenses Cannot Create A Loss
by: Bookkeeping Essentials

Tania,

I've been a bit slow this past week ... I should have told you the reason the tax program would not let you claim the home office expenses on form T777 is because home office expenses are deductible only to the extent they do not exceed the income. This means home office expenses cannot create or increase a loss for income tax purposes.

The T777 ... and the T2125 ... do however allow you to carry forward unused amounts.

In your case however, no deduction would have been allowed to the employee as he had no employment income.

Sorry I didn't mention that in my original post! :0(

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