Many small businesses find it convenient to work from home and also take advantage of the tax breaks. All costs related to maintaining the home can be prorated to the space used by the home office and written off for tax purposes. This is normally done by determining the percentage of square feet of the office over the total square feet of the house. This percentage is then applied against costs such as heating, property taxes, rent, electricity, insurance, maintenance and repairs, alarm system, mortgage interest and telephone. The home office space must either be the principal place of business or used exclusively for earning business income on a continuous basis. Capital cost allowance (depreciation) is permitted, but is often not advisable because it results in a loss of a portion of the principal residence exemption upon sale of the house. To the extent that home office expenses exceed related business income, the excess cannot be deducted from other sources of income but must be carried forward to future years and deducted from future home office business income. Please contact Simkover and Associates at 905-943-4046 if you need further accounting services or advice in relation to this topic. Click here for additional contact information