COVID-19: Home office expense deductions
Once employers and employees realized that working from home was not as temporary as they had first thought, there were many questions surrounding home office expenses. Employers requested clarification on whether their employees would qualify for the T2200, and employees wondered which expenses, if any, would qualify for a deduction on their tax returns.
In a news release on December 15, 2020, the CRA provided an update and clarification regarding the deduction for home office expenses that was announced during the Fall Economic Statement in November. The release introduced a simplified process for claiming home office expenses for Canadians working from home specifically due to the pandemic. The simplified rules also come with new forms: Form T2200S and Form T777S. These new rules significantly reduce the administrative burden on employers and takes away guess work around eligibility. The CRA has also introduced an online calculator that can assist with home office expense deduction calculations. Employees that qualify for the T2200 can still deduct their employment expenses as usual.
To be eligible for home office expense deductions, the employee must have worked from home (whether required or by choice) for more than 50% of the time over a period of at least four consecutive weeks in 2020 due to COVID-19. Once eligible, Canadian taxpayers now have two options in claiming their home office expenses:
- Temporary flat rate method: Claim a deduction of $2 for each day you worked from home during that period, plus any other days you worked from home in 2020 due to COVID-19, up to a maximum of $400 per individual. Individuals living in the same household can all claim the deduction, as long as each person qualifies independently. Under this new method, employees will not have to get a signed Form T2200 or Form T2200S from their employer. This can be claimed even if the employee has been reimbursed for some or all of their home office expenses. Part-time hours also constitute as one day, whereas vacation days or days off do not count towards the claim.
- Detailed method: Claim a deduction of actual home office expense incurred in 2020. This requires a signed Form T2200S from your employer. The form simply declares that the employee was required to work from home due to the COVID-19 pandemic, and that not all home office expenses were reimbursed by the employer. Any expenses that were reimbursed cannot be claimed. Supporting documentation relating to the claim must be retained.
Under the detailed method, the home office expenses that can be claimed mimic what could have been claimed with the traditional Form T2200 from the employer, such as utilities, maintenance, and rent. Other eligible expenses include office supplies, phone expenses, and internet access. Commissioned employees can also claim their home insurance and property tax. Here is a comprehensive list of eligible expenses.
As an employee, please keep in mind that under the detailed method, the amount of home office expenses is limited to the space used for the home office during the minimum of four consecutive week periods, although you may have multiple consecutive four-week periods.
Under the temporary flat rate method, as long as you have worked from home for at least 50% of a minimum of four consecutive weeks, you can claim the $2 for each day you’ve worked from home in 2020.
Example
Between April 1 and April 30, you were required to work from home 3 days a week during a 5-day work week, which brings you to a total of 12 days of working from home (3 days a week x 4 weeks). Starting May 1, you worked from home only 2 days a week for the remainder of the year, for a total of 70 days (2 days a week x 35 weeks). You have a home office designated for work that makes up 10% of your home and have $1,000 of home office expenses per month.
Under the detailed method your deduction would equal $100 ($1,000 x 10%). If you are using a common space (such as a dining table) to work, this calculation will require a proration of hours worked over total hours in the period, including weekends.
Under the flat rate method, the deduction would equate to $164 ((12 days + 70 days) x $2).
Please contact our Tax team if you have any questions regarding the rules for claiming home office expenses.
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About the authors
Jennifer So, CPA, CA is a Senior Manager in our Tax group. She can be reached at 416-645-6549 or jso@fullerllp.com.
Ben Schwarz is a Specialist in our Tax group. He can be reached at 647-417-0353 or bschwarz@fullerllp.com.