Room Rental and Home Based Business

I run a home based business and also rent out a portion of my condo as well.

The business is my living room so it takes up 200 square feet out of my 726 square foot condo. So my business portion is 27.5% of expenses like utilities, condo fees, interest on mortgage, etc.

I rent out the second bedroom in my condo. Everything is shared...bathroom, hallways, kitchen, living room, laundry room etc. with the renter. This works out to be 596 square feet out of the 726 square foot condo.

The living room overlaps with the renter, so what percentage do I put as business expenses and what percentage is personal when it comes to the rental expenses?

Answer

1 person found this helpful

The fact that you are renting out a "bedroom" as you stated, really has nothing to do with your Home based Business Expenses. That bedroom is still considered livable space in your home and should not be taken out of consideration when calculating your total usable living space.  I have been told directly by CRA that the total square footage must include all "usable" living space, even including rooms like the laundry room in the basement.

You cannot use the percentage you have calculated at 27.5% because you are using your living room, which is also used as a living room.  See the info below taken from CRA website:

Line 9945 - Business-use-of-home expenses

You can deduct expenses for the business use of a work space in your home, as long as you meet one of the following conditions:

  • it is your principal place of business; or
  • you use the space only to earn your business income, and you use it on a regular and ongoing basis to meet your clients, customers, or patients.

You can deduct part of your maintenance costs such as heat, home insurance, electricity, and cleaning materials. You can also deduct part of your property taxes, mortgage interest, and CCA. To calculate the part you can deduct, use a reasonable basis such as the area of the work space divided by the total area of your home.

If you use part of your home for both your business and personal living, calculate how many hours in the day you use the rooms for your business, and then divide that amount by 24 hours. Multiply the result by the business part of your total home expenses. This will give you the household cost you can deduct. If you run the business for only part of the week or year, reduce your claim accordingly. For more information, see Interpretation Bulletin IT-514, Work Space in Home Expenses.

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