Pro-rate business-use-of-home expenses
The Home office worksheet computes the business-use proportion of a home, applies it to real expenses (heating, electricity, taxes, mortgage, rent), handles federal and Québec separately when they diverge, and manages the 18(12) cap with year-over-year carry-forward. A dedicated button ships an Excel template for the client to fill in the yellow cells.
When to use it
For any client (corporation or self-employed individual) using a home room to earn business income. Manual enable, not inferable from a TB.
The office must be the client's principal place of business, OR a space used exclusively to earn income AND regularly for meeting clients. A shared corner of a table weakens the pro-rating : the cleanest files have a dedicated room.
Send the client template (optional but handy)
At the top, button Client template (Excel). Downloads a bilingual .xlsx with yellow cells for the client to fill : area, annual expenses, net income. The client returns it, you transcribe into the worksheet.
Section 1 : business-use proportion
Enter :
- Office area (sq ft or m², whichever matches the total).
- Total home area.
Ledger auto-computes the business-use ratio (e.g. 120 sq ft / 1,200 sq ft = 10%).
Section 2 : real home expenses (annual)
Seven standard lines, plus custom lines if needed. Enter the Actual annual amount, Ledger computes the pro-rated portion and shows Federal and Québec columns separately :
| Expense | Actual | Pro-rated | Federal | Québec |
|---|---|---|---|---|
| Heating | 1,800.00 | 180.00 | 180.00 | 180.00 |
| Electricity | 1,200.00 | 120.00 | 120.00 | 120.00 |
| Home insurance | 960.00 | 96.00 | 96.00 | 96.00 |
| Municipal and school taxes | 4,500.00 | 450.00 | 450.00 | 450.00 |
| Mortgage interest | 14,400.00 | 1,440.00 | 1,440.00 | 1,440.00 |
| Rent | — | — | — | — |
| Maintenance and repairs | 1,200.00 | 120.00 | 120.00 | 120.00 |
| Total deductible | — | — | 2,406.00 | 2,406.00 |
For a custom line (button Add a row, e.g. « Water »), a reminder appears : Québec treatment 100% (energy/consumption like water) or 50% (space-related).
Inside cells, you can type a calculation (e.g. 120+50, 1200/12). Handy to convert a monthly bill into annual.
Section 3 : 18(12) cap and carry-forward
The rule : home office deduction cannot create or increase a loss. It is capped at the net business income before this deduction. Excess carries forward indefinitely.
Enter :
- Net business income (before this deduction).
- Prior-year carry-forward (fed.) and Prior-year carry-forward (QC) : balance carried from past years.
Cap result (Federal, example)
When net income is lower than available, deduction is capped at net income and excess (Available − Deduction) goes to next year's carry-forward.
Section 4 : adjusting entry
Pick :
- Debit account : home office expense (e.g. « Home office fees »).
- Credit account : offset (typically « Due to shareholder » or « Contribution »).
The amount is the allowed federal deduction (after cap). Click Submit to adjusting entries. Default description : « Deduction, home office ».
Notes to the file
The worksheet reminds you of three key rules :
- 18(12) ITA : office must be principal place of business, OR used exclusively to earn income and regularly for meeting clients.
- Exclusive use : a shared corner weakens the pro-rating. The cleanest files have a dedicated room.
- Don't claim CCA on the home portion : preserves the principal residence exemption on sale.