Where to add Home office expenses for rental property income

I agree with Stevie. I have clients with 4 properties across the US and Canada and would never say they have a "home office" to collect the rent once a month. I also do not let them write off their car as going to get the rent 12 times a year would be less than 1% of "business" use.

• dogilvie89

If the client does qualify where do you enter the expenses for home office?  This is a new client for me and they have deducted the expenses in the past with no issues.  To do this they used the T2125 to add the income and expenses.  They also clearly stated is was rental income.  There has been no issues to date.

I’ve read contradicting arguments for both sides on this.  Tax folio S4-F2-C2 seems to indicate that it would be allowed based on:  

“2.46 Expenses relating to the use of a work space in the home that are incurred for the purpose of earning income from property are deductible where they meet the general requirements for deduction under the Act. The deductible portion of such expenses must be determined on a reasonable basis, as described in ¶2.18 - 2.20.”

The general requirements state:
“2.1 An individual can deduct expenses incurred in earning income from a business or property, subject to satisfying various requirements under the Act. In order to be deductible as a current expense, an outlay or expense must meet at least the following general requirements :
• it must be made for the purpose of gaining or producing income from the business or property (paragraph 18(1)(a));
• it must not be on account of capital (paragraph 18(1)(b);
• it must not be made for the purpose of gaining or producing exempt income (paragraph 18(1)(c));
• it must not be a personal or living expense (paragraph 18(1)(h); and
• it must be reasonable in the circumstances (section 67).”

The only other requirement I can see is:
“2.4 Specifically, paragraph 18(12)(a) provides that in order to deduct expenses related to a work space, the work space must be:
a. the principal place of business of the individual (subparagraph 18(12)(a)(i)); or
b. used exclusively to earn business income and used on a regular and continuous basis for meeting clients, customers or patients of the individual in respect of the business (subparagraph 18(12)(a)(ii)).
"2.5 Where the requirements described in ¶2.4(a) or (b) are met, an individual can deduct eligible expenses related to the use of a work space in the home for the year. The deduction is subject to certain restrictions that are discussed in ¶2.37 - 2.39.”

The way I read it is that if the space is the primary place of business (it’s the only one) and is for the purpose of producing rental income then it should qualify.

Anyone else have thoughts on this

• brian

it is NOT producing rental income, the Rental itself is-(IMO) however "technically" it "MAY" be allowed however Ethically I would never do it. My home based business when I look at SQ FT usage should I also claim that I must use the bathroom as well as the hallway getting to the bathroom , then of course the kitchen as that is where I keep my lunch ? They are collecting rent once a month --that is the kitchen table not an Office. That (IMO) is why a T776 does not include  home expenses on the sheet

• dogilvie89

Keep it simple and deduct only reasonable office expenses under "office expenses" line 8810 . Try to remove any personal component.  

• mdcpatax

Thanks MDCPATAX.  I didn't want to debate the merits of claiming it only where it should go.  It's on a small amount anyway.

• brian