The perfect home office is one that boosts productivity without compromising functionality and comfort. During the coronavirus pandemic, social distancing caused many businesses to pivot to work from home environments. This has resulted in increased online activity at home and investments towards creating the ideal home office environment.
You may be happy to know that whether you’re self-employed or an employee working from home, there are ways using your home as an office can provide you with a tax incentive to offset some of your costs.
The Canada Revenue Agency has guidelines that outline how Canadians can claim certain expenses, including Internet, as a business expense on their personal income tax return.
Finding the right Internet service to support your online activities for your business are critical. At Execulink, we provide high-speed Internet service across southern Ontario. We understand how important it is to our customers to receive reliable service without interruption. We offer 24/7 customer support to help get your Internet running as fast as possible.
What are Business Expenses?
In Ontario, you can claim certain tax deductions on your personal income statement. Business expenses are costs incurred for the purpose of earning income. Since using the Internet is often a necessity for working from home, the CRA considers it an acceptable cost to claim as a business expense.
Under the Income Tax Act, any employees that are required to cover employment expenses, and aren’t reimbursed by their employers, are able to claim a deduction on their return for these expenses.
Does Internet Qualify as a Business Expense?
If you work from home or are self-employed then you can claim your Internet as a business expense. In order to qualify you must use your home office as your workspace to earn business income or use it regularly (at least 50% of the time) for business purposes such as meeting clients.
Profitability of Your Business
It’s important to know that if you own and operate a small business, you cannot claim Internet a business expense for a period, without it becoming profitable. You must be expecting a reasonable amount of profit in order to claim business expenses.
Reasonable Business Expenses
Ensure your Internet expenses are considered “reasonable.” The CRA won’t accept claims that they deem unreasonable. To help you determine if your expenses is considered reasonable, the CRA has a list of rules that relate to the various types of acceptable business expenses.
Personal versus Business Expenses
Keep in mind that if you use your Internet for other personal purposes then you will be required to make that clear. You can only deduct the portion of the business expenses that are related to your use of the Internet for business purposes. You’ll deduct it as part of your home office expenses. You must separate the two types of usage in your life in order to expense it, and you cannot expense the portion that is related to personal use.
For instance, if you use Internet connection 75 per cent of the time for business purposes and your Internet costs $100, then you can claim $75 of the bill.
It’s advised that even if you purchase a laptop solely for business purposes, you should not claim 100% of your Internet expenses, since there are likely times when you use the laptop for small personal tasks as well. Watching the occasional Netflix show or surfing the web for personal pleasure would not constitute as business activity and could raise a red flag with the CRA.
However, if you use your Internet in your principal place of business 100% of the time, such as within an office space or commercial building, then that can be fully claimed.
How to Claim Internet as a Business Expense?
You will need to evaluate how much time you use the Internet for your business. Keep track of the time spent on personal tasks and business tasks.
Ensure you have your Internet bills on hand to submit for the claim. Your claim needs to be supported by documentation to prove the amount spent on Internet. If you are audited by the CRA and you cannot provide this evidence, then the claim will be disallowed.
To claim a deduction for Home Office Expenses, the employee must file a Form T2200 with the employee’s personal tax return. The form must be signed by the employer to confirm that the employees’ contract of work will require them to incur these expenses while they are doing their duties of employment.
Speed Up Your Internet Connection with Execulink
Working from home or operating a business from home often requires a fast and reliable Internet connection. Whether its video conferencing meetings or working on reports, the right Internet connection can enhance collaboration and increase productivity. The great news is you can claim Internet as a business expense to offset a portion of these added costs. Ensure you understand the process and regulations in order to take advantage!
With 24/7 support and a wide range of Internet options to suit every lifestyle, we have the awesome services your home or business needs to stay connected to what matters the most! Whether you’re looking for faster Internet speed options for streaming and gaming, or basic packages for surfing the Internet, we have the services you and your family deserve. Call us at 1-866-706-1992 today or visit our Internet page to find the Internet package you’ve been looking for!
Disclaimer: Please speak with a tax professional to advise on your individual tax return. The author and Execulink Telecom assume no responsibility or liability for any errors or omissions in the content of this site.