Working From Home: Zoning, Strata Bylaws, Insurance and Taxes

Working from home can mean a laptop in the spare room for your employer, or a business that clients visit, and the rules differ for each. Here is how zoning and business licences, strata bylaws, home insurance and CRA's tax rules apply in Metro Vancouver and the Fraser Valley, and what to look for in a home you will work from.

The short version

Employee at home or home-based business?

The City of Vancouver defines a home-based business as a business, trade, profession or occupation located in your home, with the home still used mainly as a residence, and says this doesn't include employees who work from home with a home office or desk for a remote job. Employees mostly need to think about strata bylaws, insurance and home office expenses; a business adds licences, zoning, business insurance and the self-employed tax rules.

City zoning and business licences

Each city sets its own rules for businesses run from home, usually in its zoning and business licence bylaws. Two examples:

• Coquitlam. Every business operating in the city needs a licence. A home occupation must be run by at least one permanent resident, may employ no more than one non-resident, can't take up more than 40% of the home's residential floor area, and can't bring more parking or traffic than is typical for the zone. Signs are limited to a non-illuminated fascia sign of up to 0.2 square metres, with nothing stored or displayed outdoors, and if clients will visit, the application asks for a dimensioned floor plan.
• Surrey. In a house or duplex, only immediate family members living in the home may be employed, the business can use up to 25% of the area of one floor of the house, even in an accessory building, and no storage or illuminated sign can be visible outside. In multiple-unit residential buildings, it is limited to the incidental use of a telephone and business records, with no goods stored or sold and no signs.

Vancouver says you may need a business licence to run a business from home. Before registering one at your address, ask your city's licensing office about clients, employees, deliveries, parking and signs.

Strata bylaws and what they can say

The Strata Property Act lets bylaws regulate the use of strata lots and common property. The Standard Bylaws, which apply unless a strata files its own, don't single out home businesses; they bar uses that cause a nuisance, a hazard or unreasonable noise, unreasonably interfere with others' use of their lots or common property, are illegal, or go against the purpose shown on the strata plan. A strata's own bylaws can go further, limiting business use, client visits or signs.

• Bylaws, not rules. The BC government notes that council rules can't govern the use of strata lots; only bylaws can, and changing them takes a 3/4 vote of owners and filing at the Land Title Office.
• Limits. A bylaw isn't enforceable to the extent it contravenes the Act, the Human Rights Code or any other law, and city zoning applies whatever your bylaws say.
• Shared space. Clients and couriers use the lobby, elevators and visitor parking, so check the rules on those.

Buying? Read the bylaws before you remove subjects; see Strata Bylaws in BC.

Insurance: what a home policy may not cover

The Insurance Bureau of Canada (IBC) says most home policies offer only a small coverage limit for business property such as books, tools and instruments, and only at home. It calls liability perhaps the greatest risk of a home business, and says the personal liability coverage on a home policy typically wouldn't cover it. From IBC's guidance:

• Tell your insurer. Let it know you run a business from home, and review coverage as the business grows.
• More coverage. Ask about coverage for equipment used away from home, or a separate home-based business policy.
• Professional services. If you're paid for professional services or advice, you need errors and omissions insurance, which home insurance doesn't provide.
• Lost income. Business interruption coverage, an optional add-on to commercial property insurance, pays the income you expected to earn after a covered loss.

Employees should ask their insurer whether working from home changes anything, and their employer who insures equipment it supplies. See also Home Insurance for Houses in BC.

Taxes for employees: home office expenses

CRA's temporary flat rate method doesn't apply to the 2023 and later tax years, so employees use the detailed method. You can claim work-space-in-the-home expenses if your employer required you to work from home (a verbal agreement or formal telework arrangement counts), you had to pay them, they weren't reimbursed, and either:

• Mostly at home. You worked from home more than 50% of the time for at least four consecutive weeks, or
• Only for work. You used the space only to earn employment income and, on a regular and continuous basis, to meet clients, customers or others.

Your employer must complete Form T2200, which you keep, and you claim on Form T777. Salaried employees can claim the work share of costs such as electricity, heat, water, the utilities part of condo fees, home internet access and rent; commission employees can also claim property taxes and home insurance. No employee can claim mortgage interest or capital cost allowance. The share is usually the work space's area divided by the home's finished area, adjusted for hours if it's a common area you also use for other things. The claim can't create or increase an employment loss, but you can carry it forward.

Self-employed: business use of home and your principal residence

If you run your own business, CRA lets you deduct business-use-of-home expenses if the space is your principal place of business, or you use it only for the business and on a regular and ongoing basis to meet clients, customers or patients. You can deduct part of heat, home insurance, electricity and cleaning materials, and part of property taxes, mortgage interest and capital cost allowance (CCA), using a reasonable share such as floor area. The claim can't create or increase a business loss, but it can be carried forward.

Think before claiming CCA on your home. CRA's practice is to treat the whole home as keeping its principal residence status when the business use is secondary to living there, there's no structural change and no CCA is claimed. Claim CCA, and CRA treats that part as having changed use, so part of your gain on a sale may not be sheltered, and the capital gain and recapture rules apply. See Capital Gains and Your Home.

Buying a home with work in mind

• A room with a door. A room used only for work keeps work separate, and for employees, CRA doesn't require counting hours for a designated room.
• A separate entrance. If clients will visit, an entrance that keeps them out of your living space helps.
• Internet and noise. Ask which providers serve the address before you remove subjects, and visit during your working hours to hear traffic, trains or construction.
• A suite, studio or converted garage. Ask whether it was built with permits. In Vancouver, adding a secondary suite and building or altering a garage or shed need permits, and Coquitlam's permit exemption for sheds covers only storage or garden sheds under 10 square metres.

If you're self-employed, Self-Employed? How to Get a Mortgage in Canada covers how lenders look at your income.

Questions homeowners often ask me

Do I need a business licence to work from home for my employer?

Not in Vancouver, where a remote employee's home office isn't considered a home-based business. Other cities write their own definitions, so ask yours, especially if you also run a side business or see clients at home.

Can my strata stop me from running a business from my condo?

Within limits. Owners can pass bylaws restricting business use, but council can't do it with a rule, and no bylaw can override the Strata Property Act or the Human Rights Code. Check your city's zoning too.

Does my home insurance cover my work laptop?

Possibly only in part, since most home policies have a small limit for business property and cover it only at home. If your employer owns the laptop, ask who insures it; if it belongs to your business, ask your insurer about more coverage.

Can I still use the flat rate method for my home office?

No. That temporary method ended with the 2022 tax year. Instead, you claim a share of actual costs, such as utilities and rent, with a Form T2200 from your employer, and keep records of what you paid in case CRA asks.

Will a home office affect my principal residence exemption?

Usually not, if the business use is secondary to living there, you make no structural change and you claim no capital cost allowance; that is CRA's stated practice. Employees can't claim CCA anyway. If you're self-employed, ask an accountant first.

Need space for work in your next home? Read about buying a home with a suite, or how BC's zoning rules for more homes per lot work.

This article is general information, not legal, tax or insurance advice. The details come from CRA, the Insurance Bureau of Canada, the Strata Property Act, the Province of BC and the cities of Coquitlam, Surrey and Vancouver, and were current at the time of writing; bylaws and tax rules change, so check with your city, strata and accountant. For CRA's rules for employees, see CRA's work-space-in-the-home expenses page.