Accountants can be just what the doctor ordered at tax time for self-employed physicians with offices in their homes. Help these clients save money on their income taxes by showing them how to claim home office expense deductions. The Canada Revenue Agency allows self-employed physicians with offices in their homes to deduct home office-related expenses from their professional income if one of the following two conditions exist:
- The home office must be your client’s principal place of business, or the primary location of their practice. CRA rules require that the physician use this location for seeing 50% of their patients to qualify as a principal place of business
- The home office must be used regularly on an ongoing basis for seeing clients, patients, and other business-related visitors, such as pharmaceutical representatives.
Self-employed physicians who work from multiple locations and have no other fixed locations from which they can conduct administrative tasks such as scheduling, documentation, and billing are the most common examples of physicians who qualify for this credit. For instance, Dr. Smith, who operates a mobile health clinic in a trailer he keeps at home when not in use and has no other office location, is a prime candidate for this deduction. Self-employed physicians who provide services in their home office for Telehealth and/or home visits may also qualify.
Some of the expenses your clients can claim include:
- Mortgage or rent payments attributable to the office
- Insurance and utilities attributable to the office
- Repairs, additions, or alterations to the office portion of the residence
- The cost of any special services directly incurred when using a portion of the home as a medical office, such as special cleaning and laundry services and removal and cleaning of biological materials.
Home office expenses cannot increase or create an income loss, but your client can carry forward unclaimed expenses into future years.
Prepare Form T2125 Statement of Business and Professional Activities for your clients to claim their deductions and advise them to be ready to prove the deductions are legitimate with receipts and appropriate documentation. Having a separate entrance, phone number, and street number that distinguishes the office from the main portion of the residence are also helpful in establishing the office as a legitimate deduction in the eyes of the CRA.