Office In-Home Expenses: Know Which Test Your Client Fails
Mortgage interest is never deductible to an employee, and an owner-manager working from home has no principal place of business of their own. Work through subsection 18(12), the 8(1)(f) and 8(1)(i) split, the rented-versus-owned expense lists, and the T2200 evidence CRA asks for on assessment.
Office In-Home Expenses: Subsection 18(12), Subsection 8(13), and the Commission Employee Distinction
A client who works entirely from home is told the claim is straightforward, and the return is filed before anyone tests whether the business is actually theirs, whether 8(1)(f) or 8(1)(i) applies, or whether a T2200 can be supported. This session works the qualifying tests and the expense lists in the order they have to be decided.
The category decides the number before a single receipt is added up. Two clients with identical home offices and identical housing costs can end up with deductions that differ by a factor of three — decided entirely by whether the business is theirs, whether commissions are part of the pay package, and whether the home is rented or owned.
- check_circle Subsection 18(12) for the self-employed. The principal place of business test, the alternative exclusive-use and regular-and-continuous client meeting test, and why the limitation does not apply to income from property.
- check_circle Paragraph 8(1)(f) versus paragraph 8(1)(i). The four conditions for a commission employee, the commission-income ceiling, and the two-item limit that applies to everyone else — with subsection 8(2) sitting behind both.
- check_circle Rented versus owned. The expense-by-expense comparison across non-commissioned employee, commission employee, and self-employed — property tax, insurance, security, cleaning, maintenance, mortgage interest, and CCA.
- check_circle Reimbursement and rent arrangements. Why a reimbursement usually lands as a paragraph 6(1)(a) benefit, when a rental arrangement can be respected for a self-employed person, the HST consequences, and the $500 CRA administrative position.
- check_circle Form T2200 and audit documentation. The conditions-of-employment requirement, Form T777, the photographic and meeting-log evidence that is hard to recreate after the office is dismantled, and the pre- and post-assessment questionnaires to expect.
What You'll Learn
Six modules, in the order the analysis has to be done — self-employed qualification first, then the employee provisions, the expense lists, the alternative structures, and the documentation.
expand_more Subsection 18(12): The Self-Employed Qualifying Tests
Qualification, not quantum, is where these claims are won or lost.
- The two gateways. Principal place of business of the individual, or exclusive use plus regular and continuous client meetings.
- The property income carve-out. 18(12) does not apply to income from property — what that opens up for rentals and portfolio activity.
- No general expense limitation. Business income has no equivalent of section 8, so the fight is over eligibility.
- Evidence of a principal place. Dedicated room, forwarded mailing address, equipment, banking and accounting records at home.
- The authority. Income Tax Folio S4-F2-C2 and the CRA guidance on business use of home expenses.
expand_more Whose Business Is It: Corporations, Professional Corporations, and Partnerships
The threshold question that disqualifies most owner-managers before any expense is counted.
- The ownership test. No principal place of business at home if the business is not the individual's own.
- Incorporated businesses. Why the home can be the corporation's principal place and never the shareholder's.
- Professional corporations. Billing the firm through a PC versus billing in one's own name — the single fact that flips the answer.
- Partnerships. Why a partner's home fails for both the partner and the firm, and why clients met there are the firm's clients.
- Second business locations. When moving the office function home still leaves the home as the principal place.
- Separating a business line. Establishing a distinct unincorporated line so the home qualifies for that line.
expand_more The Regular and Continuous Client Meeting Test and the Virtual Meeting Problem
The second gateway is narrower than it looks, and remote work does not satisfy it.
- Exclusive use is absolute. Why a garage, a backyard, or any space with a secondary use fails outright.
- Virtual meetings. The CRA position from the 2022 CPAC Roundtable that meetings must be face to face.
- The contrary decision. An informal-procedure case accepting weekly attendance plus evening calls — why CRA rejects it and why it binds no one.
- Regular and continuous. The supporting and contrary case law, including the more recent decisions.
- Which route to argue. Why principal place of business is usually the stronger position for a self-employed client.
expand_more Employees: Subsection 8(13), Paragraph 8(1)(f), and Paragraph 8(1)(i)
Three separate hurdles, cleared in order — the general bar, the enabling paragraph, then the workspace test.
- Subsection 8(2). The general bar — an employee expense is deductible only if section 8 names it.
- Subsection 8(13). The workspace condition: principal place where duties are performed, or exclusive use plus regular customer meetings.
- Paragraph 8(1)(f). The four commission-employee conditions, and the case law on each one.
- The commission ceiling. The cap at commission income, the one-year carryover, and the exclusion of interest and most CCA.
- Paragraph 8(1)(i). Office rent and supplies directly consumed only — and the CRA position bringing utilities inside supplies.
- Contract requirement. Why the obligation to pay one's own expenses must come from the employment contract.
- Measuring principally. The over-50% working threshold and how to support it.
expand_more Deductible Expense Lists, Space Allocation, and CCA on the Home
Once eligibility is settled, the category and the tenure decide the number.
- The three-column comparison. Rent, utilities, mortgage interest, property tax, insurance, security, cleaning, maintenance and CCA, across all three categories.
- Rented versus owned. Why a renting employee frequently out-claims an owner with far higher housing costs — and how to explain it to a client.
- Space allocation. Room count versus floor area, and the exposure created when the space has household use.
- Costs outside the rules. Internet and data, cellphone, paper and ink — and how 8(1)(i) still constrains them for employees.
- CCA on the home. Why claiming it prejudices the principal residence exemption on part of the eventual gain.
- Equipment and software. Class 8, Class 10 and Class 12, the half-year rule, and video conferencing and AI subscriptions for commission employees.
expand_more Reimbursements, Rent Arrangements, HST, Form T2200 and Audit Defence
The workarounds clients ask about, and the file that has to survive an assessment questionnaire.
- Employer reimbursement. Deductible to the employer, but why paragraph 6(1)(a) and the value of board or lodging usually produce an inclusion.
- Rent characterization. The lease, access and key indicia that decide whether an employer payment is respected as rent.
- Self-employed rent arrangements. The stronger argument, the problem of paying oneself, and why spousal ownership changes the analysis.
- Property income escape. Why rental characterization sidesteps the office in-home restrictions entirely.
- HST. Input tax credits, the absence of HST on residential rent, property tax, insurance and mortgage interest, and whether to charge on a commercial arrangement.
- The $500 position. The CRA administrative treatment of a one-time equipment payment, and the documentation needed to hold it.
- Form T2200 and Form T777. The conditions of employment declaration and the written contract or memorandum behind it.
- Audit defence. Photographs, meeting logs, and the pre- and post-assessment questionnaires CRA is issuing on these claims.
Learn Directly from Tax Experts
Managing partner at Cadesky Tax, practising since 1980 and a Fellow of CPA Ontario. Past governor of the Canadian Tax Foundation, past chair of STEP Canada and STEP Worldwide, and past chair of the CPA Canada Tax Committee for Small and Medium-Sized Enterprises. Co-author of 11 books on tax subjects.
Independent tax consultant who has taught income tax for over 30 years. Hugh has written courses for CPA Canada and over 10 papers for the Canadian Tax Foundation and STEP Canada. From 1990 to 1992 he worked at the CRA's Rulings Directorate in Ottawa writing butterfly tax rulings, and is a past Governor of the Canadian Tax Foundation.
Frequently Asked Questions
Can I start right away? expand_more
Yes. Recorded live in May 2026 and available on demand. Register and begin immediately at your own pace.
Does this course provide verifiable CPD? expand_more
Yes. You will receive a verifiable CPD certificate for 1.0 hours of instructional learning upon completion.
What is included with registration? expand_more
The full seminar recording, slides, and a knowledge assessment, with one year of access from your date of registration.
Who is this course for? expand_more
CPAs and tax professionals preparing personal returns for employees and self-employed clients, advising owner-managers and professional corporations on home office arrangements, or signing off on Form T2200 for employers.
Is there a cost to register? expand_more
Registration is $150 CAD, a one-time payment with no subscription required.