Work from home tax deductions

Mark Ting discuss some of the “work from home” tax deductions on CBC On the Coast with Gloria Macarenko.

Or read the article here.

Many Canadians spent a lot of time working from their homes in 2020. In response, and to provide Canadians some tax relief, the Canadian Revenue Agency (CRA) tweaked their rules on how employees can claim home office expenses on their 2020 personal tax returns.

If employees spent more than 50 per cent of their time over four consecutive weeks working from home, they are eligible to make home office expense deductions.

There are two methods to claim these expenses.

The simplified, or flat fee method, allows for a $2 per day deduction up to a maximum of $400. This method is straight forward and involves little in the way of effort or documentation.

The other option is more onerous as it requires some research, calculations and all the receipts to justify the deductions. However, the tax savings are potentially much higher as the deduction amount is not capped.

The longer a person worked from home in 2020, the stronger the argument is for using the more detailed method in determining expenses.

Eligible expenses

Your first stop should be the CRA website. They provide a list of eligible expenses as well as a useful calculator to help with the computations.

Some common eligible expenses are electricity, heat, water, Internet service, cellphone minutes, minor home repairs, rent and office supplies such as paper, ink and pens.

It is important to note that the expenses must be prorated based on their business use. For example, if you pay $100 for Internet a month but only used 30 per cent for businesses purposes, then your Internet deduction would be $30 for each month that you worked from home. Many people are tempted to write off the full amount but this is not correct and may flag you for an audit by CRA.

For homeowners, mortgage interest cannot be claimed. However, those who worked on commission can deduct their home insurance and property taxes. Renters can claim their rent, but only the square footage which is dedicated to their workspace. For example, if rent is $2,000 a month and the home office or workspace took up 25 per cent of home, then 25 per cent or $500 of the rent would be eligible as an expense.

Supply expenses is an interesting category as they are often fully deductible. They also are not limited to office supplies. An accountant mentioned to me that even personal protection equipment such as face masks, if bought and used by an employee to conduct business, are eligible.

T2200 form

If you opt for the detailed method of determining expenses, you will need a T2200 form from your employer.  From your employer’s perspective, there is an extra cost to provide this and it takes time to prepare the form.  Be sure to request this form from your employer with plenty of advance warning, or risk not receiving your T2200 before the tax filing deadline.

Another thing to remember is not to double dip. You can only deduct at-home expenses that were paid for out of your own pocket.  If your company already pays for your Internet, cellphone, etc., the company is writing off these business expenses which means you don’t get to.

Unless you paid for it yourself do not write it off.

Originally published in CBC’s Opinion section.