# Filling out expenses on a T2125



## Fordeka (Jan 21, 2017)

Hi,

I need to claim some professional income from a contract in 2016. I do software development and for the contract I used one room of my apartment 8 hours a day for 6 months (for simplicity sake let's say the room is 0.5 the total area of my apartment).

The expenses that I think I will be able to claim are:


Internet
Mobile phone subscription
Electricity
Apartment rent
Apartment insurance
Bus tickets (province to province not city bus)

There are two sections to enter expenses, "Part 5 – Net income (loss) before adjustments" and "Part 8 – Calculation of business-use-of-home expenses"- but I'm not clear exactly which expenses go where.

If I had to guess I would say:

Part 5

Mobile phone subscription total for 6 months * (8/24)
I use my mobile phone for development and calls 8 hours every work day.

Part 8

Internet total for 6 months * (8/24)
Electricity total for 6 months * (8/24)
Apartment rent total for 6 months * (8/24) * 0.5
Apartment insurance total for 6 months * (8/24) * 0.5
Note that only for rent and insurance do I apply the area modifier since internet and electricity are not dependent on area.


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## OhGreatGuru (May 24, 2009)

And the rest of your apartment doesn't use electricity?


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## Fordeka (Jan 21, 2017)

Yes, but I don't track exactly how much I use from each room. Would using the proportion of the room relative to the size of the apartment (0.5) be an acceptable way of estimating how much of it I used for work?


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## OptsyEagle (Nov 29, 2009)

I am not exactly sure what the 8/24 represents. I assume you are trying to factor in the business use of the property. You say that the room you are using is 0.5 or half the size of the apartment. Is this a one or two bedroom apartment. If it is a one bedroom, then where do you sleep. If it is a two bedroom I doubt it is half the size of the apartment. 

In any case, once you know how much of the apartment is for the room, you can start multiplying that factor by most of the expenses you listed. You said electricity is not dependant on area, but actually it is. So if the area of the business room is 25% of the apartment size then 25% of the electricity bill is deductible. In part 8 you will list those apartment related expenses, like rent, insurance, electricity and then subtract out the personal use amount. So if you are using 25% of the apartment for business, then subtract 75% of the expenses. The deductible expenses would be the amount paid for the 6 months you were in business.

The internet and cell phone and bus tickets are deducted in part 5. You should always back out some personal use from those expenses. I highly doubt that you have never made a personal phone call or used the internet for personal use. It doesn't matter how much you back out but if you back out nothing, it will be questioned during an audit. I would back out a minimum of 10% of those expenses for personal use. They won't argue the amount but will want to see some effort made to address this personal/business cross-over.

The only other thing that is getting calculated in part 8 is dealing with the fact that all legitimate business expenses can be deducted, even if it puts you into a loss position...except business use of home expenses. If they put you into a loss position, they cannot be used to reduce the taxes you owe on other income sources. They can be carried forward until you do make a profit on your business but if you never do, then they are not deductible. That is what the stuff at the bottom of part 8 is trying to do.


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## OhGreatGuru (May 24, 2009)

Fordeka said:


> Yes, but I don't track exactly how much I use from each room. Would using the proportion of the room relative to the size of the apartment (0.5) be an acceptable way of estimating how much of it I used for work?


My understanding of your situation is that you would first apportion basic utilities (such as electricity) by area: and if the room is not exclusively used for business, further proportion that amount by the hours of use for business.

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/t2125/ln9945-eng.html


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## Fordeka (Jan 21, 2017)

OptsyEagle said:


> I am not exactly sure what the 8/24 represents. I assume you are trying to factor in the business use of the property. You say that the room you are using is 0.5 or half the size of the apartment. Is this a one or two bedroom apartment. If it is a one bedroom, then where do you sleep. If it is a two bedroom I doubt it is half the size of the apartment.
> 
> In any case, once you know how much of the apartment is for the room, you can start multiplying that factor by most of the expenses you listed. You said electricity is not dependant on area, but actually it is. So if the area of the business room is 25% of the apartment size then 25% of the electricity bill is deductible. In part 8 you will list those apartment related expenses, like rent, insurance, electricity and then subtract out the personal use amount. So if you are using 25% of the apartment for business, then subtract 75% of the expenses. The deductible expenses would be the amount paid for the 6 months you were in business.
> 
> ...


Thanks for the reply. I used simplified numbers for this thread to keep the calculations simple and to maintain anonymity. With the 8/24 I was trying to say I used my apartment for work 8 hours a day during the contract or 1/3 of the day.

Everything I claimed here would have a personal use amount- my question is how should I calculate that amount in a CRA accepted way.

Follow-up questions:


Why would internet go in part 5? It is wired into my apartment like electricity and I can only use it from my apartment. I would have it with or without a contract.
With the cell phone I was thinking since I generally use it doing working hours I would only claim 8 hours a day's worth (8/24) and the rest would be personal use (16/24).
Assuming internet goes in part 5- would I claim 8 hours a day's worth (8/24) and have the rest go to personal use? Assuming it goes in part 8- would it be the same calculation or would it also have to take into account the area of the room multiplier (0.5)?


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## OptsyEagle (Nov 29, 2009)

It doesn't really matter where you put the internet expenses. If they are going to have the same personal use as your office expenses then part 8 is fine, but by using part 5 you can vary the personal/business use amount to a different amount, if it makes more sense. In part 5, if you back out personal use for an item, just record the business use, in dollars, in the lines provided.


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