The home office and vehicle expenses guide covers how sole proprietors claim home office deductions on the T2125 and TP-80. Incorporated IT contractors have a different route: as employees of their CCPC, they may be able to claim home office expenses against employment income instead. That route uses different forms, different eligible expenses, and a requirement that the employer certify the conditions of employment.
Why the Route Matters
A sole proprietor claiming home office expenses deducts against business income on T2125 (federal) and TP-80 (Quebec). An incorporated IT contractor paid by salary or wages is an employee. Employees do not file T2125 or TP-80. If they want to claim home office expenses on their personal return, they use the employment expense route: T777 (Statement of Employment Expenses) at the federal level and TP-59 (Employment Expenses) at the Quebec level.
The two systems run in parallel. A Quebec employee who qualifies claims home office expenses on two forms, one filed with the T1 and one filed with the TP-1, each with its own employer certification and its own list of eligible expenses.
The Employer Certification Requirement
An employee home office claim depends on an employer declaration. Federally, the employee files the T777 and keeps the signed T2200. In Quebec, the TP-59 and TP-64.3 are filed with the Quebec return.
Federal requirement: the employer must complete and sign a T2200 Declaration of Conditions of Employment. The T2200 confirms that the employee was required to work from home and was required to pay their own home office expenses. CRA says the work-from-home requirement does not have to be part of the employment contract, but it should be based on a written or verbal agreement; a formal telework arrangement can count.
Quebec requirement: the employer must complete and sign a TP-64.3-V General Employment Conditions declaration separately. The TP-64.3 is Quebec’s counterpart to the T2200 and is filed with the Quebec TP-1 return.
For an incorporated IT contractor, the employer is the corporation. The owner-employee may sign the T2200 and TP-64.3 only in their capacity as an authorized officer or director of the corporation. That should be supported by corporate records, because the corporation must genuinely require the employee to work from home, and the employment contract, telework agreement, or a corporate resolution should reflect that requirement.
Eligible Expenses for Employees
The eligible expenses for employees are narrower than for self-employed individuals. Salaried employees do not deduct mortgage interest, principal mortgage payments, property taxes, home insurance, capital expenses, or furniture on a home office claim. The deductible amounts are limited to operating costs attributable to the workspace.
For most employees, the eligible home office expenses are:
- Heat
- Electricity
- Water
- Residential internet access fees, or the portion of the internet plan reasonably attributable to work
- Maintenance and minor repairs attributable to the workspace
- Rent (for renters, the business-use portion)
Internet connection fees, leased modem or router costs, and equipment purchases are not deductible as home office expenses.
For commission employees, additional deductions may be available, including property taxes, home insurance, and certain equipment leasing costs. Most IT contractors are not commission employees, so the standard salaried-employee list usually applies.
The Business-Use Calculation
Before the calculation, the contractor must meet the work-from-home threshold. CRA generally requires the employee to have worked more than 50% of the time from the home workspace for at least four consecutive weeks in the year, unless the workspace is used exclusively for employment income and used regularly and continually for in-person meetings with clients, customers, or other people. Quebec describes the home office deduction as applying where the employer requires the employee to work primarily from home, meaning more than 50% of the time.
The calculation starts with workspace square footage divided by total finished home square footage, applied to total eligible home expenses for the eligible work-from-home period. A dedicated home office room used only for work provides a clean calculation. A common room, such as a dining room or living room, can also qualify, but the employee must prorate further by the number of hours the space was used for work compared with the total hours in the week.
The deduction reduces employment income on the T1 (federal) and TP-1 (Quebec) returns. Home office expenses cannot reduce employment income below zero, and unused amounts carry forward to the following year against employment income from the same employer.
How TP-59 Differs from T777
Both forms calculate an employment expense deduction using similar concepts, but they are separate filings addressed to separate agencies and the line items do not match perfectly. For example, Quebec’s TP-59 includes internet under telecommunications or supplies, while the federal T777 treats monthly home internet access fees as a home office expense.
The T777 is filed with the federal T1 return, while the T2200 is kept with the employee’s records. The TP-59 and TP-64.3 are filed with the Quebec TP-1 return. CRA and Revenu Québec each ask for their own employer certification, and if either agency opens a review, they will request the relevant support independently.
There are differences in how the two forms handle specific situations and in the precise wording of qualifying conditions. A contractor preparing their own returns should not assume that what the T777 accepts will be accepted automatically on the TP-59. Both forms and their supporting certifications should be confirmed against the applicable rules for each agency.
Two Routes for Incorporated Contractors
Incorporated IT contractors have two ways to handle home office costs:
Route 1: Employee claim (T777 and TP-59). The contractor takes salary from the CCPC, the corporation signs the T2200 and TP-64.3, and the contractor claims home office expenses on their personal return. The deduction reduces personal employment income. No corporate deduction is claimed for those same home office costs on the T2 or CO-17.
Route 2: Corporate reimbursement. The contractor submits a home office expense claim to the corporation. The corporation reimburses the documented amount. A properly supported reimbursement is generally deductible to the corporation on both the T2 and CO-17, and is generally not taxable to the employee when it repays employment-related expenses rather than providing an arbitrary allowance. No T777 or TP-59 is required for reimbursed expenses.
The two routes cannot be combined for the same expense. The same home office cost cannot appear both as an employee deduction on the personal return and as a reimbursement expense on the corporate return.
Which route is more advantageous depends on how compensation is structured, whether the contractor takes salary or dividends, and how the corporation’s taxable income compares to the contractor’s personal marginal rate. That question is part of the annual compensation planning conversation, not something to determine independently at filing time.
Documentation
For either route involving the T777 and TP-59, documentation must include:
- Signed T2200 from the employer (required for the federal T777 claim)
- Signed TP-64.3 from the employer (required for the Quebec TP-59 claim)
- Square footage calculation for the workspace and total home
- Hours-of-use calculation if the workspace is a common room rather than a dedicated room
- Receipts or statements for each eligible home expense category claimed for the year
- Evidence that the work-from-home arrangement met the applicable more-than-50% or exclusive-use condition
Expense totals reconstructed without receipts create significant audit risk. The employer forms are often completed for filing, but the underlying work-from-home requirement should be documented when the arrangement is made, not invented after a claim is challenged.
For incorporated IT contractors who receive salary, home office expenses are a legitimate deduction through either the employee claim route or corporate reimbursement. Getting the certification process right at the start of the year is considerably easier than reconstructing it after a filing is challenged. A CPA who handles both personal and corporate returns in Quebec confirms which route applies, documents the arrangement correctly, and ensures the personal and corporate filings are consistent with each other.