Everything you Need to Know About Working From Home and Tax Deduction
As an employee, you may be able to claim a deduction on your Canadian T1 personal income tax return for (1) home office expenses (work-space-in-the-home expenses) and (2) office supplies, and (cell) phone expenses you incur in doing your job.
Employee home office expenses
You may be able to claim a deduction for home office expenses:
a) If the home office is where you mainly do your work; OR
See below for a temporary flat rate method for 2020. We expect this will be extended to 2021 but have not seen any formal announcements and the method may change depending on who is elected in the federal election;
b) If you use your home office on a regular and continuous basis for meeting clients/customers (commission salesperson).
See below for conditions to claim and a list of allowance expenses.
Eligibility
You’re eligible to claim a deduction for home office expenses for the period you worked from home, if you meet all of the criteria:
- you worked from home in the year (whether due to the COVID-19 pandemic or your employer required you to work from home)
- have a completed and signed Form T2200S or Form T2200 from your employer (not needed for the temporary flat rate method below)
- the expenses are used directly in your work during the period
Two ways to claim
1. Temporary Flat Rate Method ($2/day; maximum $400 for 2020 – will Finance extend to 2021?)
As a result of COVID-19 and thus many people working at home and using their kitchens, bedrooms and living rooms as their workspace, the Canada Revenue Agency (CRA) introduced a temporary flat rate method to simplify claiming the deduction for home office expenses for the 2020 tax year.
Condition(s)
You worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020 due to the COVID-19 pandemic.
Amount: You can claim $2 for each day you worked from home during that period plus any additional days you worked at home in 2020 due to the COVID-19 pandemic. The maximum you can claim using the temporary flat rate method is $400 (200 working days) per individual.
Each individual working from home who meets the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses. This means multiple people working from the same home can each make a claim. This includes an adult child living in the home to the extent they are paying for the expenses they claim (whether by paying rent or sharing in household expenses) and are not being reimbursed by their employer.
What counts as a Work Day?
Days worked full time or part-time from home (excludes vacation, statutory and sick days, leave of absence)
Expenses that are covered by the $2/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 are using the flat rate method.
2. Detailed regular method
Under this method, you have to identify and have supporting documents for expenses you paid. You must separate the expenses between work and the personal portion.
Again, each individual working from home who meets the eligibility criteria may be able to claim expenses they pay (whether paying rent to their parents or their share of costs).
The CRA has a helpful link for the conditions for claiming and the types of expenses that you can and cannot claim.
Can be claimed
All salaried employees and commission employees can claim for part of the workspace only:
- Electricity, heat, water
- Condominium fees BUT only the utilities portion (electricity, heat, and water) of your condominium fees
- home internet access fees (not connection fees)
- maintenance and minor repair costs
- rent paid for a house or apartment where you live
Commission employees can also claim
- home insurance
- property taxes
- lease of a cell phone, computer, laptop, tablet, fax machine, etc. that reasonably relate to earning commission income
Cannot be claimed (whether salaried or a commission employee)
- mortgage interest
- principal mortgage payments
- home internet connection fees
- furniture (such as an office desk or chair)
- capital expenses (replacing windows, flooring, furnace, renovation expenses)
- wall decorations
Employee supplies
- If you’re a salaried employee who is required by a contract of employment to pay for supplies used directly in performing your employment duties then you may deduct the cost from your employment income used by in doing your job.
- CRA administratively allows “supplies” to also include: cell phone airtime that reasonably relates to earning employment income. Teachers may also claim various stationery items (other than books) used by teachers, such as pens, pencils, paper clips, and charts. Teachers and early childhood educators can also claim a $150 refundable tax credit for the cost of eligible teaching supplies paid in a taxation year: “eligible educator school supply tax credit.”
- Note – you unfortunately can’t claim an expense for:
- your office chair or desk as furniture (see under home office expenses on items you cannot claim);
- the cost to either buy or lease a cell phone, fax machine, computer, or other such equipment. You also can’t deduct capital cost allowance or interest you paid on money borrowed to buy this equipment.
Self-employed or business-use of home expenses
If you are self-employed, then you may be able to deduct expenses for the portion of your home used as your workspace if you meet one of the following conditions:
- If it’s your principal place of business; OR
- You use the space ONLY to earn business income and use it on a regular and ongoing basis to meet your clients or patients.
How we can help
See CRA’s link for home office expenses you may be able to claim. You may also be able to claim tax depreciation (CCA) for capital items (ie. computers, furniture and supplies) used in earning your self-employment or business income. Please contact your DMCL tax advisor if you have any questions.
Article written by Lori Oliver, CPA, CA.