Home office - value if incorporated vs not?
I am self-employed in Toronto. I am currently not incorporated but am considering becoming an Ontario corp. Some of the things I am concerned with is whether:
1) When I incorporate will I lose the ability to write of my home office?
2) Even if I can write it off when I am incorporated (or more to the point I assume my corporation would claim the office expense), will the home office write off be much "less valuable" to me as an incorporated operator than a non incorporated sole proprietor (due to taxes on corps being lower than my personal tax rate)
Some key facts:
-- I make around $90k per year revenue/income (zero expenses)
-- Our condo rental is $3k/month (thanks downtown Toronto....) and we will continue to rent over long term (please, no debating renting vs buying thanks :-) )
-- I can leave most of the money in the corporation over the long term as my spouses salary can pay our expenses
I know that the money left in the corp would be taxed lower. So even if the condo rental/home office write off is "less valuable" to the corporation than to me as an unincorporated individual, is the loss in value from that eclipsed by the fact that the money can stay in the corp over the long haul?
Thoughts and or suggestions re: how I could crunch the numbers on this would be appreciated! Thanks
You might want to consult your accountant or tax lawyer about the nuances and niceties of these things, including whether incorporation will make sense for your particular situation.
As for ability to write off home office, I do not think the company would be able to write off expenses incurred by you personally; not directly anyway. The company will have its own legal identity. You might be able to achieve the same result by you leasing the space to the company and billing the company each month. Then you would report the income less the expenses incurred to earn that income, which presumably would be your pro rata costs of maintaining the space used by the company for its office.
Again, probably best to consult someone who does these things for a living for advice tailored to your circumstances.
There are a probably a couple ways to structure this. One approach would be, the corporation pays you rent (as it is essentially renting the space). Corp deducts the rent, you report the rental income, then you deduct your home office expenses (same ones you are claiming now) against that income.
Either way, with the info you've provided I would say incorporating is the way to go.
Edit: Sorry for repeating you, I was replying when you posted and didn't see what you wrote.