Pro-rate business-use-of-home expenses
The Home office worksheet computes the business-use proportion of the home, applies that proportion to real expenses (heating, electricity, taxes, mortgage, rent…), handles federal and Quebec separately when they diverge, and manages the 18(12) cap with the carry-forward from year to year. A dedicated button sends the client an Excel template so they can fill in their yellow cells for you.
Outside Quebec (Alberta, Ontario…), the Quebec column, its cap and its carry-forward disappear from the screen, the printout and the Excel template sent to the client: only the federal calculation remains.
When to use it
For any client whose business (corporation or self-employed individual) uses a room in the shareholder's or the individual's home to earn income. The worksheet is activated manually: it is not inferred from a trial balance.
The office must be the client's principal place of business, OR a space used exclusively to earn income AND on a regular basis to meet clients. A corner of a table also used for personal life weakens the pro-rating: clean files have a dedicated room.
Send the client template (optional but useful)
At the top of the worksheet, use the Client template (Excel) button. Download a bilingual .xlsx file with yellow cells to fill in: area, annual expenses, net income. The client sends it back completed, and you transcribe it into the worksheet.
Section 1: business-use proportion
Enter:
- Office area (in sq ft or m², the unit does not matter as long as it is the same as for the total).
- Total area of the home.
Ledger automatically calculates 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. You enter the annual Real amount, and Ledger calculates the pro-rated portion and shows the Federal and Quebec columns separately:
| Expense | Real amount | Pro-rated | Federal | Quebec |
|---|---|---|---|---|
| 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 (Add a line button, for example “Water”), a reminder appears: Quebec treatment 100% (energy/consumption, e.g. water) or 50% (space-related expense).
In the cells, you can type a calculation (e.g. 120 + 50, 1200/12). Handy for converting a monthly bill to an annual amount without opening the calculator.
Section 3: 18(12) limitation and carry-forward
The rule: the home office deduction cannot create or increase a loss. It is capped at net business income before this deduction. The excess carries forward indefinitely to the following fiscal years.
Fill in:
- Net business income (before this deduction).
- Carry-forward in (fed.) and Carry-forward in (QC): the balance carried forward from past fiscal years.
Cap result (Federal, example)
When net income is lower than the amount available, the deduction is capped at net income and the excess (Available − Deduction) goes to next year's carry-forward.
Section 4: adjusting journal entry
Choose:
- Debit account: the home office expense (for example “Home office expense”).
- Credit account: the offsetting account (typically “Due to shareholder” if the corporation reimburses the shareholder, or “Contribution” for a self-employed individual).
The amount is the allowed federal deduction (after the cap). Click Submit to adjusting entries. Default description: “Deduction, home office”.
File notes
At the bottom, the worksheet itself reminds you of the three key rules to document in the file:
- ITA 18(12): the office must be the principal place of business, OR a space used exclusively to earn income and on a regular basis to meet clients.
- Exclusive use: a corner of a table also used personally weakens the pro-rating. The cleanest files have a dedicated room.
- Do not claim CCA on the residence portion: this preserves the principal residence exemption on resale.
The Print button produces a PDF with the area, the expense table with the pro-rated portions, the cap calculation with the carry-forward, the generated entry and the notes.
Frequently asked questions
Federal and Quebec give the same total in my example. Why two columns?
Because other expenses can differ between the two levels of government (for example, a custom “Water” line: 100% QC, and 100% federal too; but a space-related expense can be limited to 50% in Quebec). And the 18(12) cap has separate federal and QC prior carry-forwards, which can create a difference in the final allowed deduction.
Doesn't the prior carry-forward import automatically from the prior-year file?
Not yet: you enter it by hand the first year. Ledger keeps the value from one fiscal year to the next through the roll-forward, so from the second year on the same client, the carry-forward is already there.
Can this worksheet be used for a corporation that reimburses its shareholder?
Yes, it is actually the most common case. The offsetting account is then “Due to shareholder”: the corporation owes the deduction to its shareholder for the use of their home. The shareholder claims nothing on their personal T1; the deduction stays in the corporation.