Millions of Canadians were forced to work from home during the 2020 tax year and opted to use their bedrooms, kitchens, and living rooms to work remotely for their employers. This creates an administrative burden on employees to claim their work from home office expenses on their personal tax returns.
Good news! Employees Can Claim $400 Home Office Expenses Due to the COVID-19 Pandemic.
The Canadian government is always here to assist employed taxpayers during the pandemic! Canada Revenue Agency (CRA) announced a simplified calculation of home office expenses deduction due to COVID-19 on November 30, 2020.
Simplified Employee Expense Deductions for COVID-19
CRA has introduced a simplified method to deduct employee expenses for those working from home because of the pandemic. The first method, named the Temporary Simplified Method, allows employees to deduct home office expenses of $2 per day up to a maximum of $400 for days worked at home.
To be eligible, employees must have worked more than 50% from home over a four-week consecutive period in 2020. Multiple employees who were working from home in the same household can claim this deduction.
An eligible workday consists of the employee either working full-time or part-time from home. Disallowed days include:
- Day off (no work is performed)
- Sick leave day
- Vacation day
- Any leave or, absence days
For Salaried Employees, the Following Expenses are Allowed:
- Rent paid for the place of residence
- Utilities and utilities portion of the condominium fee
- Maintenance (e.g., minor repairs, cleaning supplies, paint)
- Home internet access fees
- Employment usage of basic cell phone service plan
- Office supplies
- Employment usage of long-distance calls
For commissioned employees, the following additional expenses can be claimed:
- Property taxes
- Home insurance
- Lease of equipment that is a reasonable amount incurred to earn employment income
Note that all deductions must be reasonable and incurred during the process of earning employment income.
Employees opting for the simplified method are not required to have their employer complete form T2200 (Declaration of Conditions of Employment). However, other employment expenses for 2020 are not permitted for deduction if an employee chooses to use the simplified method.
This simplified method is available for use in all provinces and territories except Quebec. Revenu Quebec has instead released a 2020 version of form TP-64.3-V, simplifying work from home disclosure.
Employees may still choose to use the traditional home office expenses calculation method. However, T2200 must be approved and signed by their employer. By signing the T2200 ‘Declaration of Conditions of Employment’ form, daily employment expenses for salaried and commissioned workers will be permitted by the employer.
For both the simplified and traditional methods, employees must now submit form T777S (Statement of Employment Expenses for Working from Home Due to COVID-19) along with their income tax return.
With the completion of this form, any deductions claimed can directly offset employee income. Whereas previous employee deductions would work as a tax credit (reduce tax at the lowest marginal rate), this new deduction provides savings at the employee’s personal tax rate. Note that this deduction cannot create a tax refund.
T2200 for Employers
To assist employers, CRA now offers a simplified T2200S (Declaration of Conditions of Employment for Working at Home Due to COVID-19). This form is only to be used for employees claiming work from home expenses (not other employment deductions, this will still require T2200) and removes the need to provide as much detailed information as on the T2200. For 2020, CRA is also allowing electronic signatures for the completion of this form.
To assist our clients through these unprecedented times, SDG Accountant is committed to providing constant updates on all tax treatment changes. Our tax preparation and planning services will always reflect these updated policies, giving you some much-needed peace of mind. For more information, please contact our office at 416-755-3000 or by e-mail at [email protected]
This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.
— Sami Ghaith, CPA
August 8th, 2017