Your claim for rent for a single room or a home in which your wife lives in with you would likely be disallowed by CRA as an eligible business expense. As well as your wife's claim for any expenses she would have to claim against the "rental income" she received. Here are some things to consider
- Your wife would need to report as income the rent charged and in accordance with CRA's rules on renting a property to a family member, she would definitely not be able to claim a "rental loss" incurred by claiming the mortgage interest.
- You would both need proof that you actually paid her rent for the space, used exclusively by you, and the rent charged was the Fair Market Value of what an unrelated person would pay.
- The home would need to be 100% in your wife's name and any funds received by her would need to be her's exclusively and be kept separate and apart from any accounts you may have access to. As well you would need proof that the payments came from your income.
- And the main reason these expense deductions would probably be disallowed for both of you is you are not considered to be "at arm's length" and the CRA's definition of personal or living expenses (from the attached IT Folios);
- Expenses relating to an individual’s home that are personal or living expenses are specifically precluded from deduction by paragraph 18(1)(h)
- 2.35 The term personal or living expenses is defined in subsection 248(1) to include:
“… the expenses of properties maintained by any person for the use or benefit of the taxpayer or any person connected with the taxpayer by blood relationship, marriage or common-law partnership or adoption, and not maintained in connection with a business carried on for profit or with a reasonable expectation of profit.”
And again if you were to rent an entire house from her, it would need to be a separate entity, used exclusively by your business and the same rules would apply.
https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-fol...
https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-fol...
