If you got used to claiming a home office during the pandemic, the rules have moved on, and a lot of people are still working off what they knew in 2021. The quick, no-paperwork option most employees used is gone. What’s left is more work to claim, but for the right person it’s often worth more.
Here’s where things actually stand for the 2025 tax year, which is what you’re filing in 2026.
The Flat-rate Method is Gone
For a few years, employees could claim a flat $2 for every day worked from home, up to an annual cap, with no receipts and no forms from their employer. That temporary flat rate method ended after 2022. It does not apply to 2023 or any later year.
If you’re an employee claiming a home office now, you use the detailed method. That means claiming a portion of what you actually paid, keeping the receipts, and, this is the part people miss, getting a signed Form T2200 from your employer confirming you were required to work from home. No T2200, no claim. Ask for it early; payroll departments get buried in these requests every spring.
Employee or Self-employed? The Rules Are Different
This is where most of the confusion lives, and it matters more than any single expense. The home office rules split into two completely separate systems depending on how you earn your income.
If you’re an employee, you get a T4, you claim on Form T777 and you’re limited to a specific list. If you’re self-employed, a freelancer, consultant, or small business owner filing a T2125, you’re in a different regime with a broader list of what you can claim. Some people have both kinds of income, and the expenses have to be split accordingly. Getting the two mixed up is the fastest way to have a claim denied.
What Employees Can Claim
To claim anything, you need to have worked from home more than half the time for at least a month straight, or have a space you use only for work. If that’s you, and you have your T2200, you can claim the employment-use portion of your home’s running costs.
That includes your electricity, heat, and water, your home internet access fees, rent if you rent your home, and minor maintenance and repairs to the work space. You figure out the portion by the size of your work space relative to your home, adjusted for how much of that space’s use is actually for work.
Here’s what trips people up: as a salaried employee, you cannot claim mortgage interest, your mortgage principal, property taxes, home insurance, or furniture. Not the desk, not the ergonomic chair, not the monitor. Commission employees, the ones with an amount in box 42 of their T4, get a bit more room and can also claim home insurance and property taxes. But for most salaried employees, the big-ticket housing costs are off the table.
Office supplies are a separate, smaller bucket. Pens, paper, ink, stamps, sticky notes, things you use up doing your job, can be claimed if your employer required you to buy them. Your chair and your laptop can’t. The line CRA draws is whether the item gets consumed or kept.
What the Self-employed Can Claim
If you run your own business from home, the picture opens up. You claim business-use-of-home expenses on Form T2125, and the list is longer: a portion of your utilities, home insurance, maintenance, property taxes, and, unlike employees, a portion of your mortgage interest or rent.
You can even claim capital cost allowance (depreciation) on the portion of your home used for business. But that one comes with a warning we give every client who asks: claiming CCA on your home can put part of your principal residence exemption at risk and trigger recapture and a capital gain when you sell. In most cases the tax you’d save now isn’t worth the bill later. It’s a decision to make on purpose, not by default.
One rule applies to everyone, employee or self-employed: you can’t use home office expenses to create or grow a loss. You can only claim up to the income the work space relates to. If your expenses run higher than that in a given year, employees and the self-employed can generally carry the unused portion forward to a future year against the same source of income.
What This is Worth
For a salaried employee in a modest apartment, the detailed method might come to a few hundred dollars, real money, but you’ll work for it with receipts and a T2200. For a self-employed consultant running a business out of a dedicated home office, the deduction can run into the thousands once mortgage interest or rent and a full share of utilities come into play.
That gap is the whole point. The method that’s left rewards the people with the most genuine home office cost, which is usually business owners, not employees who happen to take work home.
Talk to a CPA Before You Claim
Home office deductions are one of those areas where the rules read simply and the application gets messy fast, the employee/self-employed split, the CCA trap, the loss limitation, the documentation. If you’re a business owner claiming this, it’s worth having your return looked at by someone who does this every day. At Cassar CPA, we work with incorporated professionals and small business owners across Ontario, from our offices in Toronto and Oakville, and this is exactly the kind of thing we sort out through our personal tax planning and corporate tax planning work so it holds up if CRA ever asks.
If you’re not sure which side of the line you’re on, or whether claiming CCA on your home is a mistake, that’s a short conversation worth having before you file. Book a discovery meeting and we’ll walk through it with you.