Cheng-Chung Yu, MBA, CPA, CA, CFA, CFP
Published in 2017
In today’s working environment with smartphones and all other modern technology at our fingertips, work can be done from anywhere, at any time and through a variety of devices, tools or applications. The delineation between work and play becomes blurry, and the space between production and leisure becomes intertwined. Working from home or anywhere can be a blessing as some of us enjoy the freedom, flexibility or spontaneity. It can be a curse too as some may not like the idea of working on call or on demand all the time.
The guidelines from the Canada Revenue Agency require that you meet one of the following two conditions when deducting home office expenses: first, that your home is your principal place of business; second, that 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. Use a reasonable basis such as the area of the work space divided by the total area of your home, or the number of rooms used for business divided by the total number of rooms in your home, excluding the common facility areas such as kitchen or washrooms. You can deduct the proportional home expenses such as property taxes, mortgage interest, insurance, maintenance and repairs, and utilities. Normally you are advised not to take capital cost allowance against your home as the principal residence. Otherwise, you may end up having to pay income taxes on a portion of the capital gain when selling your home. If your business already has a commercial office, you typically cannot claim home office expenses on top.
The advantages of working from home stem primarily from cost and time savings, and could include the following.
• You save the costs associated with renting or owning a commercial office. Plus, you get to deduct a portion of your home expenses as home office expenses.
• You may save some commuting time and costs.
• Without the morning rush and with reduced time in traffic jams, you could be more productive by working more flexible hours and dress more leisurely and comfortably.
On the other hand, working from home may not suit everyone, particularly if you need a commonly acceptable place to draw retail traffic and a fixed area to make team collaboration easier. Areas to watch out for in order to make the arrangements of working from your home viable may be encompassed below.
• You might lose a more formal or prestigious space to meet the clients or work with external, non-family co-workers.
• Certain industries may need some retail presence or showroom space for walking-in or walking-by customers, despite the increasing e-Commerce or internet orders in this modern age.
• You would still need to make sure all the infrastructure and logistics work, including having good computing infrastructure, fast internet speed, and an adequate communication and phone setup. You also need to make sure your colleagues can all have the appropriate access and ability to work and collaborate on the common or shared computer or physical files.
• You need to make sure you have sufficient space for a meeting room or boardroom, as well as areas or space to place necessary office equipment.
• You need to have the self-discipline to work in a more personal and relaxing space/environment. There could be more distractions from your kids, pets, TV or refrigerator. Furthermore, you may still want to by and large stick to some more formal working schedule of nine to five, Monday to Friday, to avoid too much intrusion into your personal life and space.
• Conceivably with reduced fixed or common places to meet or collaborate, your colleagues might lose some of the space, opportunities or habits that come with working together.
Working from your home and working from your office may not necessarily be mutually exclusive. Increasingly, this is becoming more relevant to a growing number of people depending on the work requirements and the season. We all continually adjust ourselves to the environment and today’s technological innovations. We need to be adaptive to the needs of the business and yourself, and continue to learn about new technology and ensure appropriate cyber security. Ultimately, each of us needs to picture and position ourselves as a value-addition focal point and see how you contribute to the workplace and the society, regardless of where, when and how you work.