Income Tax: Work from Home Tax Guide
There’s no doubt that 2020 was a confusing year in more ways than one. After all, many Canadians worked from home for the first time. So, that means there are more questions than ever that will need to be answered when it comes time to do your taxes. Here’s everything you need to know about claiming office expenses while working from home.
- What you need to know about claiming office expenses while working from home
- Even if you weren’t required to work from home, but your employer provided you with the choice to work at home because of COVID-19, CRA will consider you to have been required to work from home for purposes of claiming home office expenses for 2020
- Two methods for claiming home office expenses for 2020 are: the new “temporary flat-rate method” and the “detailed method”
The first step is to determine if you’re eligible for home office expenses. In general terms, to be entitled to deduct home office expenses, an employee must be “required by the contract of employment” to maintain such an office, as certified by the employer on the T2200. It must also be either where an employee principally (more than 50% of the time) performs work-related duties or the space must be used exclusively to meet customers on a regular and continuous basis in the course of employment.
But, Canada Revenue Agency (CRA) announced in 2020 that, even if you weren’t required to work from home, but your employer provided you with the choice to work at home because of COVID-19, CRA will consider you to have been required to work from home for purposes of claiming home office expenses for 2020.
CRA also announced two methods for claiming home office expenses for 2020: the new “temporary flat-rate method” and the “detailed method.”
Tip: It may be beneficial to seek advice from a tax expert, especially when filing your 2020 taxes if you worked from home.
New temporary flat-rate method
- Simplified process for the temporary flat-rate method. You’re eligible to use this new method if you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020 due to COVID-19. Under this method, you simply claim $2 for each day you worked from home, up to a maximum of $400 (ie, $2/day for up to 200 working days) per individual. Each individual working from home can use the temporary flat-rate method to calculate their deduction for home office expenses and can each make a separate claim for up to $400. The benefits of using the flat-rate method are that you don’t have to track and keep any supporting documents to track your expenses nor do you have to allocate any expenses between employment and personal use. In addition, you don’t need a signed T2200S form from your employer.
- Expenses covered by the $2 a day flat rate. The temporary flat-rate method is used to claim home office expenses. You can’t claim any other employment expenses (line 22900) if you’re using the flat-rate method.
Important: With the flat-rate method, you don’t have to calculate the size of your workspace, keep supporting documents or get a form T2200 completed and signed by your employer.
When using the detailed method, you must have worked from home more than 50% of the time for a period of at least four consecutive weeks in 2020, and have a completed and signed form T2200S (or form T2200) from your employer.
If you choose the detailed method, you’re able to deduct a variety of expenses, such as the cost of rent, electricity, heating, home internet access fees and water, as well as maintenance and minor repair costs. Commissioned employees can also deduct home insurance, property taxes and leasing costs associated with a cell phone, computer, laptop, tablet, fax machine, etc that reasonably relate to earning commission income.
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What counts as a workday?
CRA considers a workday as any day where you worked either full-time or part-time hours from home. This means that days off, vacation days, sick leave days and other leave or absence days don’t count as a workday.
Canada Revenue Agency support forms
- What is form T2200S? This form is a declaration of employment for working at home due to COVID-19. This is a shorter version of Form T2200 that you get your employer to complete and sign if you worked from home in 2020 due to the COVID-19 pandemic and aren’t using the temporary flat-rate method. Your employer completes and signs this form to certify that you worked from home in 2020 due to COVID-19 and had to pay your own home office expenses.
- What is form T777S? This form is a statement of employment expenses for working from home due to COVID-19. This form is used to calculate your claim for home office expenses.
- Home office expense calculator. CRA created this calculator to help employees calculate home office expenses.
Determining your workspace claim
Whether you work at the dining room table or in a spare bedroom, there are several factors to consider when calculating your employment use of the workspace, including:
- Size of your home and workspace
- Types of workspaces
- Hours per week you use the space for work
New eligible expenses
The CRA has expanded the list of eligible expenses that can be claimed to include home internet access fees. A comprehensive listof eligible home office expenses has also been created.
Frequently asked questions (FAQs)
Can I deduct COVID-19 masks?
No, not unless you’re working in a field where it’s required.
Can I deduct home office furniture?
Under normal circumstances, no, because such items as office chairs, a new desk or a new monitor for your computer are considered capital expenses that can’t be automatically deducted by employees. But the Government of Canada says you can deduct the cost of supplies you’ve paid for if you meet all of the criteria. Also, for 2020, CRA is allowing employers to reimburse employees for up to $500 worth of expenses, including home office furniture, tax-free and without having to get a signed form T2200. As with T2200 requests, check with your boss or human resources to confirm your employer is participating (companies are able to reimburse, but it’s not a requirement).
Can I deduct workspace expenses?
It depends. These expenses include rent, home insurance (but only if you work on commission; salaried employees can’t deduct insurance), electricity/hydro, cleaning materials, etc that you pay for as part of maintaining your home. To deduct a portion, the property needs to be the place where you principally work or is used solely to earn income from your employment. If you meet the requirements, you can deduct a portion of those expenses, if your employer permits and provides you with a T2200.
Can I deduct property taxes?
Only if you work on commission, in which case you can deduct a reasonable amount from the total costs with your T2200.
Can I deduct my internet?
Yes! You can deduct part of your monthly internet fees, even if your company provides you with a signed T2200 form.
Can I deduct my phone purchase?
No, but you can deduct a portion of your basic cell phone service plan with a T2200 but conditions apply.
More income tax resources
- CRA 2020 tax tips
- Home office expenses for employees
- Roundup of the best tax tips for Canadians
- Tax tips blog
- How to get more money back from your tax return in 2021
- TFSA vs RRSP: How to decide between the two
- Moved back to Canada? Here’s what you need to know for filing your taxes
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