If you freelance from home, part of your household costs may be deductible as business-use-of-home expenses. You calculate them in Part 7 of Form T2125 and report them on line 9945.
You must meet one of these:
Use a reasonable basis. Most often that's the workspace area ÷ total home area. If the room is also used personally, adjust for hours of business use ÷ 24, and reduce the claim further if you only work part of the week or year.
A dedicated 120 sq ft office in a 1,200 sq ft rented apartment is 10%. With rent of $24,000 a year, utilities of $1,800 and tenant insurance of $360 (total $26,160), the business portion is $2,616.
If instead the space were a dining table used for business 8 hours a day, the calculation would also multiply by 8/24, and by the share of days actually worked.
These expenses can't be more than your business's net income before you deduct them. In other words, they can't create or increase a business loss. Anything you can't deduct carries forward to the next year. And don't claim the same expense twice: anything on line 9945 can't also appear on another T2125 line, such as Utilities on line 9220.
Keep the annual household bills, write down your area measurements and any hours estimate once, and apply the same percentage consistently. Then put only the final business portion on line 9945. See our T2125 categories guide for the other lines.
Want this in a spreadsheet? The Canada Self-Employed Income, Expense & GST/HST Tracker ($19 CAD, Excel/Google Sheets) logs income, expenses by T2125 line, and GST/HST collected and paid, with monthly totals.
Self-employed people whose workspace is either their principal place of business, or used only to earn business income and on a regular and ongoing basis to meet clients, customers or patients.
No. The deduction can't be more than your business's net income before these expenses. Unused amounts can be carried forward to the next year if you still qualify.
No. Employees use different rules and forms (such as T2200 and T777). This page is about self-employed people filing Form T2125.