How to Record Home Office Expenses

In the ever-changing business world, the traditional office environment has changed quite a bit.  More businesses are embracing the convenience and flexibility of home offices.  Whether you’re a freelancer, remote employee, or business owner, understanding how to document your home expenses is important when tax season comes around.  These tips will help guide you along in this process.

1.      Determine Your Business Use Percentage:

After setting up your home office, measure the space and divide it by the total square feet of your home.

For example:

If using a spare bedroom as office space and it measures 10’x11’.   The square footage of the room is 110 square feet and your total home square feet is 2000sq ft.

To find the Business Use Percentage use the following equation:

Business Use Square Footage / Total Home Square Footage = Business Use Percentage

                                                             110 / 2,000 =0.055

                                                              0.055 x 100 = 5.5%

2.      Which Expenses Can Be Included as a deduction on your taxes:

·        Electricity

·        Heating

·        Home insurance

·        Cleaning materials

·        Property taxes

·        Mortgage interest

·        Rent

·        Capital cost allowance

3.      Collect Home Statements:

You can either collect the statements monthly or at the end of the year. The easiest way to record all the transactions is in a spreadsheet.  (I have a Home Office Expenses Spreadsheet available to help with this process). Enter the transaction and add up the total for each expense, times the total by the Business Use Percentage determined in Step 1.

For example:

Total Mortgage Interest x Business use Percentage:

If you have $1000 in mortgage interest:  1000 x 5.5% = 55.00

Now you are ready to complete your home office expenses section of your income tax with ease.  

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