Business-Use-of-Home Expense Calculator Canada
The business use of home calculator works out your T2125 deduction from area and hours, with the loss restriction, carry-forward and the tax it saves.
What it does
The business use of home calculator works out the share of your household running costs a home-based business can deduct on form T2125, applies the CRA rule that the claim cannot create a loss, and prices what the deduction is worth at your federal and provincial rates.
Data sources & parameters
The figures below drive this calculator. We keep them aligned with the latest official guidance, and each result recalculates automatically whenever a value changes.
| Parameter | Value | Source | Last updated |
|---|---|---|---|
| Federal personal income tax brackets and rates for 2026. | Rate schedule | canada.ca | Effective 2026-01-01Verified unchanged at CRA; citation replaced, it previously named a fund manager rather than a government page and carried no URL. |
| Maximum federal basic personal amount for 2026. | 16,452 | canada.ca | Effective 2026-01-01Verified 16452 at the CRA indexation page; the citation was the bare text CRA 2026 with no URL a reader could follow. |
| Provincial and territorial personal income tax brackets and rates for 2026. | Rate schedule | canada.ca, revenuquebec.ca | Effective 2026-01-01BC lowest rate corrected 5.06 to 5.6 pct; PE fourth band to 142520 with a new 20 pct band over 200000. MB kept at 47000/100000: its indexation is paused, and CRA payroll tables confirm it. |
| Provincial and territorial basic personal amounts for 2026, claimed at each jurisdiction lowest rate. | Rate schedule | canada.ca, revenuquebec.ca | Effective 2026-01-01NL raised from 11188 to 13094, retroactive to 1 January 2026 (CRA T4127 July 2026, 123rd edition; payroll applies a prorated 15000 from July). Other 12 amounts unchanged. audit 2026-09-23 |
| Quebec abatement of basic federal tax | 0.165 | canada.ca | Effective 2026-01-01Quebec refundable federal tax abatement (reduces federal tax for Quebec residents) |
| Ontario surtax for 2026: 20 pct of basic Ontario tax over 5818 plus 36 pct over 7446. Prince Edward Island has no surtax. | Rate schedule | canada.ca | Effective 2026-01-01Label names the year in the auditor format. Thresholds 5818 and 7446 unchanged (CRA T4032ON effective 2026-01-01). audit 2026-09-23 |
| Minimum federal basic personal amount for 2026, reached at net income of 258,482 and above. Between 181,440 and 258,482 the amount falls in a straight line from the maximum. The Yukon amount follows the same formula. | 14,829 | canada.ca | Effective 2026-01-01 |
| Manitoba basic personal amount phase-out for 2026: full amount at net income up to 200,000, falling in a straight line to zero at 400,000. | Rate schedule | canada.ca | Effective 2026-01-01 |
| Ontario tax reduction for 2026 (no dependants): tax and surtax are reduced by the lesser of that amount and twice the basic reduction amount minus it. | Rate schedule | canada.ca | Effective 2026-01-01 |
| British Columbia tax reduction for 2026 (BC announcement of 17 February 2026): up to 690 at taxable income to 25,570, then falling at 3.56 percent of the excess until it reaches zero at 44,952. | Rate schedule | canada.ca | Effective 2026-01-01Corrected from the January 2026 payroll table (575, ending 41,722) to the July 2026 edition's annual (Option 2) formula: maximum 690, 3.56 percent, zero above 44,952. |
We always strive to use the latest data for every variable so our results and reports are as accurate as possible. Even so, errors are possible — you should not rely on this tool or its report alone, and we accept no liability for any decision made based on it.
The formula
Business use % = (workspace area / total area) x (business hours / 168); Eligible amount = home expenses x business use %; Allowed = min(eligible + carry-forward, net business income); Carry-forward = the remainder
How it works
It measures the workspace against the total floor area, narrows that by the hours the space is actually used for the business, applies the resulting percentage to your home expenses, caps the claim at your net business income, carries the excess forward, then re-runs the tax brackets with and without the deduction to value it.
Where it is used
- Sizing the home office claim on a T2125 before filing
- Seeing how much of a claim is deferred when profit is low
- Comparing a dedicated office against a room that doubles as living space
Worked example
An Ontario consultant with a 150 sq ft office in a 1,500 sq ft home uses … of the property for business. Against … of household costs that is … of eligible expenses, all of it allowed against CA$45,000.00 of profit, worth about … at a … combined rate.
What the business use of home calculator does
Self-employed Canadians who work from home eventually ask how much of the hydro bill, mortgage interest and property tax belongs on the tax return. This calculator takes the size of the workspace, the hours it is used, the year’s household bills and the business profit, and returns the deduction the CRA rules allow, the part that has to wait for a better year, and what the allowed amount saves in tax.
The claim goes on line 9945 of form T2125, after every other business expense. That position is what makes the loss restriction work, and the loss restriction is the rule most home-office claims get wrong.
The two tests: space and time
The first test is space. Divide the workspace area by the total finished area of the home, in the same unit on both sides; mixing square feet and square metres throws the claim off badly. Most people use floor area, which the CRA accepts. Counting rooms is acceptable only when the rooms are roughly the same size.
The second test is time, and it applies only when the space is shared. A room used for the business and nothing else counts at the full area share, which is why the calculator defaults to 168 hours a week. A dining room that is an office from nine to five is business space for part of the week and family space for the rest, so the area share is reduced by the hours worked there. Forty hours out of 168 turns a 10% area share into a 2.4% claim.
The CRA expects the claim to be defensible. Keep the measurements and a note of the hours, because an auditor asks for both first.
Which home expenses count
The eligible list covers what it costs to run the whole home for the year:
- Heat, electricity and water
- Home or tenant insurance
- Maintenance and general repairs
- Rent, if you rent
- Mortgage interest and property tax, if you own
Mortgage principal is a capital repayment, not an expense, and is never on the list. Neither is the purchase price of the house. Work done only inside the workspace, such as painting the office, is deductible in full as a business expense rather than through the percentage, so it does not belong in these boxes either.
Capital cost allowance on the building is technically available and almost always a mistake. It can take part of the eventual sale gain outside the principal residence exemption, turning a tax-free gain into a taxable one. This tool leaves it out.
The rule that stops a loss
Business-use-of-home expenses cannot create or increase a business loss, which is why the calculator asks for net business income before the claim.
With the default inputs (a 150 sq ft office in a 1,500 sq ft home, $23,100 of household costs, $45,000 profit), the eligible amount is $2,310 and all of it is allowed. If the profit were only $1,500, only $1,500 would be allowed this year and the remaining $810 would carry forward. The carry-forward does not expire: it is added to next year’s eligible expenses and tested again. The calculator accepts last year’s carry-forward as an input so the running balance stays right.
In a loss year the claim saves nothing now. It is deferred rather than lost, but deferral has a cost.
What the deduction is worth
A deduction saves tax at your marginal rate. The calculator computes federal and provincial tax on the net business income, again on the income after the deduction, and reports the difference. Both calculations include the basic personal amounts, so a claim against a very small profit can be worth nothing: the income was already below the point where tax starts.
The reported rate is the combined federal and provincial rate the deduction removed. In Ontario at a $45,000 profit that is 19.05%, so a $2,310 claim saves about $440. The same claim against a $120,000 profit in British Columbia is worth 38.29%, about $885. The home is the same; only the bracket changed.
For Quebec the calculator applies the federal abatement and Quebec’s own brackets, but Quebec residents file a separate provincial return with its own rules, so treat the result as indicative.
Owners, renters and the shape of the claim
Renters usually have the simpler and larger claim: rent is one large deductible line, and the percentage applies to all of it. Owners deduct mortgage interest and property tax instead, which can be substantial early in a mortgage and shrinks as the interest portion falls.
The donut in the results breaks the eligible amount down by expense type. For most owners, mortgage interest and property tax make up most of the claim; for most renters, rent is almost all of it.
Common mistakes
- Measuring the workspace in square feet and the home in square metres
- Including mortgage principal along with the interest
- Claiming a shared room at the full area share with no hours adjustment
- Forgetting to carry forward the amount denied in a low-profit year
- Claiming capital cost allowance and weakening the principal residence exemption
- Deducting the whole utility bill rather than the business share
All figures are estimates based on the numbers entered and current published rates. This is general information, not tax advice; confirm your claim with the CRA guide or an accountant before filing.
About This Tool: Business Use of Home
Business use of home: use this tool to get an instant, accurate estimate. The figures follow official CRA guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.
Tax year 2026 · Data last reviewed 2026-10-19
Frequently asked questions
What does the business use of home calculator do?
How do I work out the business percentage?
Which home expenses can I include?
What happens if my business made very little money?
Should I claim capital cost allowance on my home?
Are the tax figures kept current?
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