Maximizing Your Home Office Deductions
The past few years have seen an increase in popularity of virtual healthcare services. Changing patient preferences and technological innovations are cited as the driving forces for the healthcare industry- an industry that previously lagged behind the transition of nearly every major consumer-facing industry, to incorporate digital channels into their models. The COVID-19 pandemic forced the industry to pivot, thus accelerating the shift, and successfully proving the effectiveness and efficiency of these offerings. While it’s clear that not everything can be done remotely, virtual healthcare is most definitely here to stay and will become the new norm for many.
As a result, many physicians have found themselves working remotely- particularly during the last year. This may have implications for your 2020 tax return, as the CRA allows self-employed individuals to deduct home office related expenses, provided you meet the criteria. To qualify, the home office must be your principal place of business (which is generally interpreted by the CRA as being 50% or more of the time, over a period of four or more consecutive weeks). Physicians that qualify are able to deduct any expenses directly related to the home office, including (but not limited to) electricity bills, office supplies, rent, mortgage interest, property tax, insurance, and home internet services.
Physicians that are self-employed but not incorporated, will use the Form T2125 (Statement of Business or Professional Activities) to report all revenues and expenses. Physicians that are incorporated have two options. The corporation can pay you rent for using your space, and then deduct the rent as an overhead expense, or, if you pay yourself a salary, you would deduct your expenses as an employee, on your personal tax return using Form T777 (Statement of Employment Expenses) or T777S.
For a full list of deductible expenses, or for more information on the eligibility requirements, contact one of our advisors today!