Question

A salesperson pays $3,680 for property taxes on their home. One out of 8 rooms in the home is used for home office space. What is the impact on the employment income of the employee, assuming the employee is required to pay expenses, is not in receipt of tax-exempt allowance and no commission limitation?

Answer 1

A salaried (non-commissioned) employee who owns their home will not be able to deduct property taxes and insurance in respect of their home office. However, commissioned employees may be able to deduct a reasonable portion of property taxes and home insurance.

In order for these expenses to be deductible, the following conditions must be met:

• the employment contract must require that the employee pay for the relevant expense;
• the employer must sign a prescribed form (T2200) certifying that the conditions required for deductibility have been met; and
• the expenses must not have been reimbursed by the employer.

Furthermore, with respect to deducting home office expenses, one of two additional conditions in paragraph 8(13)(a) must be met:

(i) the home office must be the place where the individual principally performs the duties of the office or employment, or

(ii) the home office must be used exclusively during the period in respect of which the amount relates for the purpose of earning income from the office or employment and used on a regular and continuous basis for meeting customers or other persons in the ordinary course of performing the duties of the office or employment.

The word "principally" in paragraph 8(13)(a) means "more than 50% of the time".