Repairs and Renovation that affect only the business square footage

Expenses such as laying carpet in or repainting your home office space relate only to business usage. You can take 100 percent of these expenses into your calculation. You do not have to prorate these expenses based on square footage.

The accounting entry to set up the home office expense in the corporation is ­

            DR Home office expenses

            CR Shareholder loan

 

This entry reflects the expense in the company and also that the company owes you for its portion of those expenses. Note that if your expenses carry a recoverable sales tax component (such as GST in Canada), you would also debit the sales tax recoverable account so that you will get back the tax you paid on those expenses.

Here's a concrete example of a home office calculation:

      Total square footage of house            1,450 square feet

      Square footage of office space              225 square feet

      Heat                                              $1,250

      Electricity                                        1,612

      Property taxes                                   1,750

      Mortgage interest                              9,849

      Roof repair                                        2,950

      Hot tub repair (master bedroom)           615

      Paint for office space                              95

 

What is the home office expense for the year? Ignore taxes. Prorated expenses (1,250 + 1,612 + 1,750 + 9,849 + 2,950) X 225/1,450 =                                            $2,701.71

Personal expenses 0% (615)             0.00

Business expenses 100% (95)         95.00

Total home office expense         $2,796.71

Your entry would be ­

DR Home office expense            $2,796.71

CR Shareholder loan                                   $2,796.71