Can I still use the $2-a-day flat rate?

No. The temporary flat-rate method applied to 2020, 2021 and 2022 only. For 2023 and later years, employees use the detailed method: a signed Form T2200 from the employer, receipts, and Form T777.

What does an employee need from the employer?

A completed and signed Form T2200, Declaration of Conditions of Employment, confirming you were required to work from home. You must also have worked from home more than 50% of the time for a period of at least four consecutive weeks in the year. Keep the form; you do not file it, but the CRA can ask for it.

Can an employee deduct mortgage interest?

No. No employee, salaried or commission, can deduct mortgage interest, mortgage principal or capital cost allowance. Salaried employees can claim the workspace share of electricity, heat, water, rent, maintenance and home internet. Commission employees can add home insurance and property taxes.

Which line does the claim go on?

Employees: Form T777, carried to line 22900 (other employment expenses). Self-employed: line 9945 (business-use-of-home expenses) on Form T2125, which flows into net business income.

My home office is also the guest room. Can I claim it?

The self-employed can claim a space that is their principal place of business even if it is not used exclusively for the business, but a shared room must be prorated for the hours it is used for work. A room used only occasionally for business and mostly for personal purposes gives a small claim. Employees prorate the same way.

Should a self-employed person claim capital cost allowance on the house?

Usually not. Claiming CCA on the part of your home used for business means that part is no longer fully covered by the principal residence exemption when you sell, and any CCA claimed can be recaptured as income. The CRA's T2125 guidance flags this; most people skip the CCA line.

What if the claim is bigger than my income?

An employee's home-office claim cannot exceed the employment income it relates to; the unused part carries forward to a later year with the same employer. A self-employed claim cannot create or increase a business loss; the unused part carries forward to the next year's business-use-of-home calculation.

Home-office expenses in Canada: employees (T2200 and T777) vs self-employed (T2125), 2026

This guide is part of Tax-saving strategies for Canadians (2026).

Who this is for

Two groups, with two different rulebooks. Employees whose employer requires them to work from home: they need Form T2200 and claim on Form T777. Self-employed people (sole proprietors and partners) who run the business from home: they claim on Form T2125 under subsection 18(12) of the Income Tax Act. Incorporated owners are employees of their company and follow the employee rules.

How it works

The claim is always a share of the home’s running costs. The share is the workspace area divided by the total finished area of the home, and if the space is also used for personal purposes it is prorated again for the hours it is used for work.

Employees (detailed method only). The temporary flat rate ended after 2022. To claim you must have a signed Form T2200 from your employer and must have worked from home more than 50% of the time for at least four consecutive weeks in the year. A salaried employee can deduct the workspace share of electricity, heat, water, rent, maintenance and home internet. A commission employee can add home insurance and property taxes. No employee can deduct mortgage interest, mortgage principal or capital cost allowance. The claim goes on Form T777 to line 22900 and cannot exceed the employment income it relates to; the unused part carries forward.

Self-employed (Form T2125, line 9945). The space must be either your principal place of business, or used only to earn business income and on a regular and continuous basis to meet clients, customers or patients (Folio S4-F2-C2). You deduct the business share of rent, mortgage interest, property taxes, home insurance, utilities, maintenance and, optionally, capital cost allowance on the home. The deduction cannot create or increase a business loss; any excess carries forward to next year’s calculation.

Worked example: a 150 sq ft office in a 1,500 sq ft home (Ontario, 2026)

The workspace is 10% of the home. Annual costs: mortgage interest $18,000, property tax $6,000, utilities and internet $4,800, home insurance $1,800, maintenance $5,400. Tax saved is computed from the 2026 federal and Ontario brackets in our data files.

Claimant	Eligible costs	Claim (10%)	Income before the claim	Tax saved
Self-employed, net business income	$36,000 (all five)	$3,600	$90,000	$1,067 (29.65%)
Salaried employee	$10,200 (utilities, internet, maintenance)	$1,020	$75,000	$302 (29.65%)
Commission employee	$18,000 (adds insurance and property tax)	$1,800	$75,000	$565 (31.41%)

The self-employed claim also lowers net business income, which reduces CPP contributions when that income is below the $74,600 year’s maximum pensionable earnings for 2026; in this example income stays above it, so CPP is unchanged.

The rules that trip people up

No T2200, no claim. The CRA reviews employee home-office claims. The form must be signed by the employer and you must meet the more-than-50%, four-consecutive-weeks test.
Mortgage interest is for the self-employed only. It is the most common error on employee returns.
Capital cost allowance on the house. Claiming CCA on the business part of your home costs part of the principal residence exemption and any CCA claimed can be recaptured when you sell. It is rarely worth it.
Shared rooms. A kitchen table used for eight working hours a day gets a time proration on top of the area share. A dedicated room used only for work does not.
Reasonableness. Subsection 18(12) and Folio S4-F2-C2 require the space to be the principal place of business, or exclusively used and regularly used to meet clients. A laptop on the couch does not qualify as exclusive use.
Quebec. Quebec employees also need form TP-64.3 from the employer for the provincial return, on top of the federal T2200; check the Revenu Québec page for the current version.

What to do next

Enter your home, workspace and costs in the home-office deduction calculator to get the claim and the tax it saves for your mode. Self-employed? Put your net income into the self-employed tax calculator to see what the deduction saves in tax and CPP. Employees can use the income tax estimator with the claim entered as a deduction, and the take-home pay calculator to see the change per paycheque. More strategies: Tax-saving strategies for Canadians (2026).

Questions people ask

Can I still use the $2-a-day flat rate?: No. The temporary flat-rate method applied to 2020, 2021 and 2022 only. For 2023 and later years, employees use the detailed method: a signed Form T2200 from the employer, receipts, and Form T777.
What does an employee need from the employer?: A completed and signed Form T2200, Declaration of Conditions of Employment, confirming you were required to work from home. You must also have worked from home more than 50% of the time for a period of at least four consecutive weeks in the year. Keep the form; you do not file it, but the CRA can ask for it.
Can an employee deduct mortgage interest?: No. No employee, salaried or commission, can deduct mortgage interest, mortgage principal or capital cost allowance. Salaried employees can claim the workspace share of electricity, heat, water, rent, maintenance and home internet. Commission employees can add home insurance and property taxes.
Which line does the claim go on?: Employees: Form T777, carried to line 22900 (other employment expenses). Self-employed: line 9945 (business-use-of-home expenses) on Form T2125, which flows into net business income.
My home office is also the guest room. Can I claim it?: The self-employed can claim a space that is their principal place of business even if it is not used exclusively for the business, but a shared room must be prorated for the hours it is used for work. A room used only occasionally for business and mostly for personal purposes gives a small claim. Employees prorate the same way.
Should a self-employed person claim capital cost allowance on the house?: Usually not. Claiming CCA on the part of your home used for business means that part is no longer fully covered by the principal residence exemption when you sell, and any CCA claimed can be recaptured as income. The CRA's T2125 guidance flags this; most people skip the CCA line.
What if the claim is bigger than my income?: An employee's home-office claim cannot exceed the employment income it relates to; the unused part carries forward to a later year with the same employer. A self-employed claim cannot create or increase a business loss; the unused part carries forward to the next year's business-use-of-home calculation.

Sources

Every figure in this guide comes from one of these primary sources, checked on September 11, 2026.