What to take away
- The self-employed business-use-of-home claim is for individuals who carry on an unincorporated business, not for corporations.
- As a shareholder-employee you must show your costs are comparable to those of ordinary employees before you can claim them.
- Amounts the corporation reimburses cannot also be claimed personally.
- Rent paid to you by the corporation is income to you, and the corporation’s deduction must be reasonable.
Why the self-employed home office claim does not apply
The CRA’s guidance on business use of home expenses is written for individuals who are sole proprietors or partners in a partnership. Its audit manual adds that the restriction on work space in the home expenses applies only to individuals, so it does not govern what a corporation can deduct. In practice this means you cannot simply total your household costs, take a share and deduct them on the corporation’s T2 return.
The corporation can have its own legitimate costs, but the question is how a cost that belongs to your household becomes a cost of the company. Each route below answers that question differently, and the answer affects both the corporation’s return and your personal one.
Route one: claim the costs as an employee
If the corporation pays you a salary, you are an employee, and you may be able to claim work-space-in-the-home expenses personally using Form T777. The CRA’s conditions are that your employer required you to work from home, that you were required to pay for the expenses, and that you worked more than half of the time from the home work space for at least four consecutive weeks, or use the space only to earn employment income and regularly meet clients there. You also need Form T2200 signed by the employer.
The costs are limited. For salaried employees the CRA lists electricity, heat, water, the utilities part of condominium fees, home internet access fees, maintenance and minor repairs, and rent if you rent the home where you live. It says mortgage interest, mortgage principal, furniture and capital items cannot be claimed. An owner of a paid-off home with modest utilities may find the claim small.
What a shareholder-employee has to show
The CRA applies two conditions to employees who are also shareholders. The costs must have been incurred as part of your employment duties rather than as a shareholder, and you must have been required to pay them yourself under those duties. To show both, you must establish that the expenses are comparable to those of employees with similar duties who are not shareholders or related to one, at your company or at similar businesses.
The CRA adds that an implied requirement is harder to show for a shareholder-employee and that a written contract may not be enough. If both conditions are met, you may have the authority to certify Form T2200 for yourself. That is a useful result, but it also means the burden of the record rests with you. Write down why a similar employee would work from home and pay these costs.
Route two: the corporation reimburses documented costs
The CRA’s employer guide describes a reimbursement as an amount paid to repay expenses an employee incurred while carrying out their duties, supported by detailed receipts. A corporation that reimburses documented work costs is on firmer ground than one that pays an unsupported amount. The same guide describes an allowance as usually an arbitrary, predetermined amount that the employee does not support with receipts, which is a different treatment.
Two cautions apply. First, you cannot claim on your own return any expense that was or will be reimbursed by the employer. Second, the CRA treats a payment of a shareholder’s personal costs by the corporation as a shareholder benefit, which the corporation cannot deduct and the shareholder reports as income. The line between a work cost and a personal one is a question of fact, so keep the evidence.
Route three: the corporation rents space from you
Some owners have the corporation pay rent for the part of the home used by the business. The CRA audit manual discusses this directly. The shareholder pays tax on the gross rent unless the activity is a commercial activity giving rise to a source of income, in which case reasonable expenses relating to the part of the residence used for business can be claimed. The corporation may deduct the rent if it is reasonable in the circumstances.
The manual also warns that if the corporation already has its own offices away from your residence, the rent expense may be disallowed. This route needs a written arrangement, a rent supported by what the space could rent for, and payments that actually move through the corporation’s records. It also has tax consequences for you personally, so decide with advice rather than after the fact.
An illustrative comparison
The numbers are round and for illustration only. Suppose you own your home and work from a dedicated office that is 10 percent of its finished area. Your electricity, heat, water and internet total $4,800 for the year. On the employee route, the employment-use amount would be $480. The mortgage interest and property tax do not count, so most of the household cost stays outside the claim.
A rent arrangement could produce a larger corporate deduction, but the rent is taxable to you, so the benefit depends on the difference between your corporate and personal tax positions and on whether the amount is reasonable. A higher figure is not automatically better. Your own result depends on your facts, and an accountant can run the comparison.
Records and common mistakes
Keep the measurements of the space, the bills for each cost, a note of how often and why you work from home, and the signed T2200 for six years. If the corporation reimburses you, keep the receipts you submitted. If it rents from you, keep the written agreement and your support for the amount.
Common mistakes include deducting household costs directly in the corporation’s books with no arrangement behind them, claiming the same cost personally and through a reimbursement, paying a round monthly amount with no support, and assuming the sole proprietor rules apply because the business used to be unincorporated.
What to discuss with your accountant
Ask which route fits your pay structure, since the employee claim assumes you are on payroll and our article on paying yourself a salary from your corporation covers that decision. Ask how any rent or reimbursement will be recorded, and how GST/HST input tax credits on home costs work, which is a separate question covered in our article on input tax credits for vehicles and home offices.
The conversation is also a good time to review the shareholder loan account, since a payment that is not properly supported can end up there. Bring the T2 working papers, your payroll records and your measurements, and agree on a method before the corporation’s year-end.
Sources & editorial notes
Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
- Income Tax Folio S4-F2-C2, Business Use of Home ExpensesCanada Revenue Agency
- Income Tax Audit Manual, chapter 24: Shareholder benefitsCanada Revenue Agency
- Employees who are shareholdersCanada Revenue Agency
- Home office expenses for employees: eligibility criteria, detailed methodCanada Revenue Agency
- Home office expenses for employees: expenses you can claimCanada Revenue Agency
- T4130 Employers’ Guide: Taxable Benefits and AllowancesCanada Revenue Agency
- Shareholder benefitsCanada Revenue Agency
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.