The Home Office Across the Border: What Canada Lets You Deduct, What the US Doesn't, and the Remote Worker in the Middle

Canada and the United States both allow a deduction for a home office, but for different people. Canada allows employees to deduct home office expenses if the employer certifies on Form T2200 that working from home was a condition of employment, and allows the self-employed to deduct business-use-of-home expenses. The US, since 2018, allows no deduction for employees at all and allows the self-employed to deduct home office expenses under a simplified or actual method. A cross-border remote worker who is an employee taxed in both countries gets the Canadian deduction and nothing in the US; one who is self-employed gets both, computed differently.

Key takeaways

• Canada, employees: the detailed method requires Form T2200 from the employer and allows a proportionate share of rent, utilities, internet, and maintenance (not mortgage interest or property tax for employees) based on the workspace's share of the home, limited to employment income from that employer. The temporary flat-rate method ended after 2022.
• Canada, self-employed: business-use-of-home expenses on Form T2125, including a proportionate share of mortgage interest, property tax, insurance, utilities, and maintenance, and optional capital cost allowance (which affects the principal residence exemption), limited to net business income with a carryforward.
• US, employees: no deduction for unreimbursed employee expenses, including home office, for 2018 through 2025 under the TCJA, and the 2025 tax law made the suspension permanent. Employer reimbursement under an accountable plan is the only route.
• US, self-employed: the home office deduction on Schedule C for a space used regularly and exclusively for business: the simplified method ($5 per square foot up to 300 square feet, $1,500 maximum) or the actual method (a proportionate share of mortgage interest, taxes, insurance, utilities, repairs, and depreciation on Form 8829).
• Cross-border: the deduction is taken on the return of the country taxing the income; a US resident employee of a Canadian employer taxed in Canada on Canadian workdays can claim the Canadian deduction against that income with a T2200; a Canadian resident self-employed with US clients claims the Canadian deduction on the T1 and, if the income is US-taxable through a fixed base, the US deduction on the 1040-NR.

Canada

Employees. The employer must certify on Form T2200 that the employee was required to work from home (a written or verbal agreement suffices) and did so more than 50% of the time for at least four consecutive weeks, or uses the space exclusively for work and regularly for meetings. Deductible: the workspace's proportion (by area, and by hours if the space is shared) of rent, electricity, heat, water, internet, and minor repairs; commission employees can add property tax and insurance. Not deductible for employees: mortgage interest, property tax (except commission employees), capital cost allowance, furniture. The deduction cannot exceed employment income from the employer, with the excess carried forward.

Self-employed. Business-use-of-home expenses on Form T2125 include the proportion of mortgage interest, property tax, insurance, utilities, maintenance, and (optionally) capital cost allowance. The space must be the principal place of business or used exclusively for business and regularly for clients. The deduction cannot create a business loss; the excess carries forward. Claiming CCA on the home converts that portion to business use and can reduce the principal residence exemption on sale; most practitioners advise against it.

United States

Employees. No deduction. The miscellaneous itemized deduction for unreimbursed employee business expenses was suspended by the TCJA and made permanent in 2025. A US-resident employee working from home for any employer, US or Canadian, claims nothing on the 1040. The employer can reimburse home office costs tax-free under an accountable plan.

Self-employed. The home office must be used regularly and exclusively for business and be the principal place of business (or used for meeting clients, or a separate structure). The simplified method deducts $5 per square foot up to 300 square feet; the actual method allocates the home's expenses by area on Form 8829 and includes depreciation, which is recaptured on sale of the home. The deduction is limited to the net income from the business, with a carryforward under the actual method.

The cross-border remote worker

US resident, Canadian employer, working from a US home. The wages are US-source (work performed in the US); no Canadian tax on them (unless the employee is also a Canadian resident); no Canadian deduction; no US deduction for an employee. Nothing to claim.

Canadian resident, US employer, working from a Canadian home. The wages are Canadian-source under Article XV and taxable in Canada; the US employer can issue a T2200 (or equivalent statement) certifying the work-from-home requirement, and the employee claims the Canadian detailed-method deduction on the T1. The US taxes nothing (the work was performed in Canada and the employee is a non-resident).

Canadian resident, self-employed, US clients, working from a Canadian home. Business income taxable in Canada; business-use-of-home expenses on T2125. If there is no US fixed base, no US tax and no US deduction.

Dual filer (US citizen in Canada, self-employed). Business-use-of-home on the T1 (Canadian rules) and the home office deduction on Schedule C (US rules), each computed under its own method; the two deductions differ, and the foreign tax credit reconciles the tax, not the deductions.

Worked example

A Vancouver resident works remotely for a Seattle employer (employee) from a dedicated room that is 12% of her apartment, and separately runs a freelance design business from the same room.

• Employment. Wages taxable in Canada. The Seattle employer provides a T2200 certifying the remote arrangement. She deducts 12% (further prorated by hours for the shared use) of rent, utilities, and internet against the employment income on the T1. No US filing (non-resident, work performed in Canada).
• Freelance. Business income on T2125; business-use-of-home at the business's share of the same room's expenses, including the rent portion, limited to net business income. No US fixed base; no US deduction.
• If she were a US resident working from a Seattle apartment for the same employer: no deduction in either country as an employee; the freelance business would claim the US home office deduction on Schedule C.

Official sources

"As an employee, you may be able to claim certain home office expenses (work-space-in-the-home expenses, office supplies, and certain phone expenses)." — Canada Revenue Agency, Home office expenses for employees, https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-22900-other-employment-expenses/work-space-home-expenses.html

"You must regularly use part of your home exclusively for conducting business. [...] You must show that you use your home as your principal place of business." — Internal Revenue Service, Home Office Deduction, https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

Practitioner note

The cross-border home office question is really a question of which country taxes the income, because the deduction follows the income. Canadian-resident remote employees of US companies should ask the US employer for a T2200; it costs the employer nothing and is worth a few thousand dollars a year to the employee. US-resident employees of any employer have no home office deduction and should ask for reimbursement instead.

See also: Planning a move? Start with the Canada-to-US tax checklist and browse every corridor by city, province, and state.

Next step

Fairlight prepares the home office deduction on the return of the country taxing the income, the T2200 request to a US employer, and the dual computation for self-employed dual filers. See cross-border pricing or book a call.