For most freelancers the home office is the single biggest deduction — and the most mis-claimed. Part 7 of Form T2125 is where the CRA wants it calculated, and the result flows to line 9945 in Part 5. Here's the calculation the form is walking you through. Part of the complete T2125 line-by-line reference.
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Do you qualify?
You can deduct workspace-in-home expenses if you meet one of these conditions:
- the workspace is your principal place of business, or
- you use the space only to earn business income, and use it on a regular and ongoing basis to meet clients, customers, or patients.
Most full-time freelancers working from home pass the first test outright. The second test is stricter than people assume — it's both exclusive use and regularly meeting clients there, not either one alone.
Which home costs count
The CRA's list: heating, electricity, cleaning materials, home insurance, property taxes, mortgage interest (the interest — mortgage principal isn't on the list), and CCA on the home if you choose to claim it. Renters: the workspace share of your rent and related costs is deductible the same way.
Think twice before claiming CCA on your home: the CRA warns that capital gain and recapture rules apply when you later sell, which can claw back the benefit against your principal-residence treatment.
The workspace percentage
Use a reasonable basis — the CRA's example is the area of the workspace divided by the total area of your home. Two refinements from the guide:
- Dual-use space (a room that's office by day, living room by night): count the hours per day it's used for business, divide by 24, and apply that fraction to the business share of the costs.
- Part-year or part-week business: reduce the claim accordingly.
The loss limit — and the carry-forward that softens it
Business-use-of-home expenses cannot create or increase a business loss. What you actually deduct is the lesser of:
- your carry-forward from last year plus this year's business-use-of-home expenses, and
- your net income (loss) after the other adjustments.
Anything you can't deduct isn't lost — it carries forward to the next fiscal period, claimable as long as you still meet one of the qualifying conditions. A lean year doesn't waste your home-office costs; it defers them. The generator applies this limit and tracks the carry-forward note automatically.
Gotchas
- No double-dipping: anything claimed on line 9945 can't be claimed elsewhere on the form. Home rent doesn't also go on 8910; home property tax doesn't also go on 9180; home insurance doesn't also go on 8690.
- It's the last deduction applied. Part 7 runs after everything else, precisely so the loss limit can be tested against your near-final net income.
- Line 9945 is in Part 5, calculated in Part 7. The worksheet lives at the back of the form; only its result travels forward.
Skip the worksheet. Enter your home costs and workspace share — the generator computes Part 7, applies the loss limit, and fills line 9945.
T2125 Generator → Home office deduction guide →FAQ
Can I claim a home office if I also rent a co-working desk?
The test is whether the home workspace is your principal place of business, or is used exclusively for business and regularly for meeting clients. If your co-working desk is your principal place of business, the home claim needs to pass the second, stricter condition.
Is mortgage principal deductible?
No — the CRA's list includes mortgage interest, property taxes, insurance, utilities and maintenance. Principal repayment isn't an expense.
My home office expenses are bigger than my profit this year. Do I lose them?
No. You deduct only up to your net income (the loss limit), and the rest carries forward to next year — as long as you still meet a qualifying condition then.
I rent — can I still claim line 9945?
Yes. The workspace share of your rent and related expenses is deductible under the same conditions and the same loss limit.
Follows CRA Guide T4002 and the CRA's business-use-of-home guidance (verified 2026-07-02). For planning and organization — not tax, legal, or accounting advice. Confirm with the CRA or a qualified professional before filing.