Home Office Expenses: Business-Use-of-Home (Line 9945)
Self-employed? Your home office is claimed in Part 7 of the T2125 and ends on line 9945. Employees claim through a T2200 and Form T777 instead, under narrower rules. This page covers who qualifies, the two conditions, the calculation, and a fully worked example.
If you're self-employed, CRA lets you deduct part of your home costs when your workspace meets one of two conditions. Either it is your principal place of business, or you use it only to earn business income and on a regular, ongoing basis to meet clients, customers or patients. You work out the claim in Part 7 of Form T2125 (amounts 7A–7P) and enter the allowable amount on line 9945 (CRA, business-use-of-home expenses).
What a self-employed person can include. Renters can deduct the workspace share of their rent and of any other costs tied to the workspace. Homeowners can deduct the workspace share of maintenance (heating, home insurance, electricity, cleaning supplies), property taxes and mortgage interest, and CCA if they choose to claim it. Mortgage principal is never deductible. Phone and cellphone airtime are not part of this calculation. Their business share goes on line 9220. Claim each cost in only one place.
How to calculate it. Use a reasonable basis, which normally means the workspace area divided by the home's total area. If the room also has personal use, CRA's guide for the self-employed multiplies that area share by business hours ÷ 24 for each day. It also scales the claim down if you only operate part of the week or year (Guide T4002, chapter 3). The result can bring your business income down to zero but can never create or increase a loss. Any unused amount carries forward to future years under the same rules.
Employees are a different claim. If you're an employee working from home, you don't use T2125 at all. You need a Form T2200 signed by your employer, which confirms you were required to pay these costs and weren't reimbursed. Your workspace must be where you mainly work (more than 50% of the time for at least four consecutive weeks) or used only for work and regularly for meeting clients. You claim on Form T777 and line 22900 of your return, and since 2023 only the detailed method is allowed. The $2-a-day flat rate ended after the 2022 tax year. Employees can never deduct mortgage interest or CCA, and salaried employees can't deduct home insurance or property taxes either (CRA, expenses employees can claim).
Two cautions. If you claim CCA on the business part of a home you own, the capital gains and recapture rules can apply to that part when you sell. That's why many owners leave 7K at zero (see our CCA guide). And keep evidence for both numbers: a floor plan or measurements for the area share, and a work schedule if the space is shared.
What You Can (and Can't) Deduct
Know exactly what belongs on Line 9945 — and what the CRA says doesn't qualify.
What Qualifies
- Rent: workspace share (renters)
- Mortgage interest: workspace share (owners; never principal)
- Property taxes: workspace share (owners)
- Home insurance: workspace share
- Heat, electricity and water: workspace share
- Maintenance and cleaning supplies, e.g. minor repairs and cleaning (workspace share)
- CCA on the home: allowed for owners, but usually unwise (see below)
- Amounts carried forward from earlier years
Does NOT Qualify
- Mortgage principal payments
- Any amount that would create or increase a business loss (it carries forward instead)
- Phone and cellphone costs (business share goes on line 9220, not Part 7)
- Costs already claimed on another T2125 line (e.g. home rent on 8910 or home utilities on 9220)
- Capital improvements such as a new roof or furnace (capital, not a current expense)
- A desk in a shared room when the home is not your principal place of business and you don't meet clients there
Rules & Limits
Special CRA rules and percentage limits that apply to business-use-of-home expenses.
Special Rules
The two conditions (self-employed)
Heads upMeet ONE: (1) the workspace is your principal place of business, OR (2) you use it only to earn business income and on a regular, ongoing basis to meet clients, customers or patients. A room you also use personally can still qualify under condition 1, but then you prorate by hours.
Income Tax Act s. 18(12); CRA business-use-of-home pageCannot create or increase a business loss
Heads upThe allowable claim (7P) is the lesser of your home costs for the year plus any carry-forward (7M) and your net income after adjustments (7N). Anything left over (7O) carries forward to later years.
T2125 Part 7, amounts 7M–7PEmployees: T2200 + T777, line 22900
Heads upEmployees need a T2200 signed by the employer and claim on Form T777 (line 22900). The workspace test is "more than 50% of the time for at least 4 consecutive weeks" or "used only for work and regularly to meet clients". Since 2023 only the detailed method is allowed. Employees keep the T2200 on file and don't send it in.
CRA line 22900, work-space-in-the-home expensesThink twice before claiming CCA on your home
Heads upCRA allows owners to claim CCA on the business part of the home. But when you sell, the capital gain and recapture rules can apply to that part. Many owners leave amount 7K at zero for that reason.
Guide T4002, chapter 3; Guide T4037Percentage Limits
| Rule | Limit |
|---|---|
| Area share (self-employed) | Workspace area ÷ total home area |
| Shared room: hours adjustment (self-employed) | Area share × business hours ÷ 24 |
| Shared space: hours adjustment (employees) | Area share × work hours per week ÷ 168 |
Real-World Examples
See how different professionals use Line 9945 deductions in practice.
Dedicated office in an owned house (8%)
160 sq ft office in a 2,000 sq ft house, used only for work and her principal place of business. Heat $1,600, electricity $1,100, home insurance $1,400, maintenance $500, mortgage interest $9,000, property taxes $4,200, water $400. No CCA claimed. Net income after adjustments: $40,000.
$18,200 home costs × 8%
$1,456 on line 9945
Shared dining room, 5 days a week
Same house, but he works at a 200 sq ft dining room table (10% of the area) for 8 hours a day, 5 days a week. It is his principal place of business, so it qualifies even though the family eats there.
$18,200 × 10% × 8/24 × 5/7
$433.33 on line 9945
Low-income year: the cap and carry-forward
First-year business with home costs of $1,456 (7M) but only $1,000 of net income after adjustments (7N).
Lesser of $1,456 and $1,000
$1,000 now; $456 carried forward (7O)
Same office, but as a salaried employee
Same 8% office, but the bookkeeper is an employee. Salaried employees can claim utilities and maintenance but not insurance, property taxes or mortgage interest: 8% × ($1,600 + $1,100 + $400 + $500).
$3,600 × 8%
$288 on Form T777 (line 22900)
Common Mistakes to Avoid
These errors on Line 9945 can trigger a CRA review — here's how to get it right.
Claiming home utilities on line 9220 as well as in Part 7
Heat, electricity and water for a home workspace are claimed in Part 7 only. CRA says expenses claimed on line 9945 can't also be claimed elsewhere on the form.
Deducting the whole mortgage payment
Only the interest part qualifies, and only the workspace share of it. Your lender's annual statement shows the interest separately.
Using the employee rules (or the old $2/day flat rate) on a T2125
The flat rate was for employees for 2020–2022 only. Self-employed people always calculate actual costs in Part 7, and they don't need a T2200.
Forgetting last year's carry-forward
If a low-income year capped your claim, the unused amount (7O) goes in 7L the following year. Keep the prior year's T2125 to find it.
Commonly Confused Categories
These categories are often mixed up with Business-Use-of-Home Expenses. Here's the difference.
Telephone & Utilities
Home heat, electricity and water go in Part 7 (line 9945). Line 9220 is for utilities at separate business premises and for the business share of your phone and cellphone airtime.
Rent
Rent on your home goes in Part 7 (line 9945). Line 8910 is for business property such as an office, studio or shop.
Property Taxes
Property taxes on your home go in Part 7 (line 9945). Line 9180 is for property taxes on business land and buildings.
Insurance
Home insurance for the workspace goes in Part 7 (line 9945). Line 8690 is for commercial premiums on business buildings, machinery and equipment.
Sample Receipt Walkthrough
See how ScanForTax processes a typical home office expense.
Enbridge Gas
2025-01-20
Ontario
How ScanForTax categorizes this
ScanForTax reads the bill and splits out the $27.04 HST. There is no separate Part 7 category in the app, and a gas bill will usually be suggested as Telephone & Utilities. So tag each home bill (for example "home office") and leave it out of your line 9220 total. At year-end, filter by the tag to total heat, electricity, insurance and so on for amounts 7A–7G. At a 12% workspace share, $24.96 of this bill's $208.00 pre-tax amount is business use.
Tax Calculation Breakdown
See the exact tax math for a typical home office purchase.
$235.04 monthly gas bill (12% business-use home office)
Ontario
At a 12% workspace share, the business part of this bill is $28.20: $24.96 of gas plus $3.24 of HST. If you're registered for GST/HST and claim the $3.24 as an ITC, put only $24.96 into Part 7. The T2125 tells you to leave GST/HST out of expenses when you've claimed an ITC. The other 88% of the bill is personal.
Frequently Asked Questions
Who qualifies for the home office deduction in Canada?
How do I calculate business-use-of-home expenses?
What can self-employed people claim that employees can't?
Do I need a T2200 if I'm self-employed?
Can home office expenses create a business loss?
Can I claim my whole mortgage payment?
Is the $2-a-day flat rate still available?
Should I claim CCA on my home?
Where Line 9945 sits on the full form: T2125 line by line →
Related Professions
Profession-specific guides that frequently use Home Office deductions.
Tax Guides by Province
See how tax recovery works for home office expenses in each province.
Related Expense Categories
Sort Business-Use-of-Home Expenses receipts automatically
ScanForTax files each receipt under T2125 Line 9945 and splits out the GST/HST you can claim back. First 15 scans free, no credit card required.