ITCs Home Office

by Tracy
(Ontario)

As a sole proprietor, my office space at home is 10%.

Are the ITCs prorated at the end of the period? Do I claim 100% during the year?

Is it the same for business use of vehicle?

Thanks.

Hi Tracy,

I'm not sure how you are booking your home office space expenses.

I usually don't recommend claiming the ITCs at 100% through the year ... because it has the potential to create cash flow problems for the small business at the end of the year when they have to "give back" the ITCs they overclaimed during the year.

There is also the risk that a small business owner will forget to make the annual adjustment.

Assuming the business is a GST/HST registrant and that they qualify for the home office expense deduction, then consider one of the following:

If you want to book them monthly, prorate the amount at the time you book the entry. For example, a hydro bill for $100 would be recorded:

DR Home Office Expenses 10% excluding GST/HST ITC
DR Owner's Draw 90% including GST/HST ITC
DR GST Payable (for ITC's) 10%
CR Cash in Bank 100%

At year-end, reconcile the home office expense account to the T2125 and adjust accordingly.


If you do it as an annual entry, then calculate the amount on the T2125. Once that is done, book an entry like this into the books:

DR Home Office Expense $xxx split from T2125
DR GST Payable (for ITCs) $xxx split from T2125
CR Owner's Contribution $xxx total of T2125

In BC, people who work from home should have contacted their utility companies as they are ineligible to receive the residential energy credits. They need to file an application to obtain the consumer energy rebate.

There are special rules for ITCs pertaining to vehicles. Click here to learn about them.






P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.