2020 COVID-19 Working From Home – What Home Office Expenses Can You Write-off?

Background

Before 2020, an employee may deduct work-related expenses, such as home office expenses, home office supplies that they pay for employment purposes if it’s required under their contract of employment. Because of COVID-19, in 2020, many companies have temporarily shifted to a “work from home” environment. Employees who have been working from home during the pandemic should, generally speaking, eligible to claim home office expense deductions on their personal income tax returns for the 2020 tax year.

 

 

On December 15, 2020, CRA released guidance on how individuals who are working remotely from home as a result of COVID-19 may be eligible to claim certain home office expenses for tax purposes. Almost 40% (over 6 million employees) of Canadian employees have begun working from home amid the Covid-19 outbreak, according to new data from Statistics Canada. To simplify the process for both employees and employers to claim the deduction.

For 2020 personal income tax returns, CRA allowed two new options for employees who worked from home to claim the deductions, and they are:

1. Temporary Flat Rate Method
2. Detailed Method (T2200S)

Temporary Flat Rate Method

This is the simplest method for claiming your 2020 work from home office expenses. To be eligible for this method, you have to meet all conditions below:

• You worked from home in 2020 due to the COVID-19 pandemic 
• You worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020
• You are only claiming home office expenses and are not claiming any other employment expenses (e.g. motor vehicle expenses)
• Your employer did not reimburse you for all of your home office expenses

With this method:

• You can claim a flat $2 for each day you worked from home in 2020 due to the COVID-19 pandemic, up to a maximum of $400
• Your employer is not required to complete and sign Form T2200
• You are not required to keep documents to support your claim. However, you cannot claim any other employment expenses under this method.

Detailed Method

To be eligible for this method, you have to meet one of the conditions below:

• You worked from home in 2020 due to the COVID-19 pandemic
• You were required to pay for expenses related to the workspace in your home, and one of the following applies:
  • Your workspace is where you mainly (more than 50% of the time) work for a period of at least four consecutive weeks. The period can be longer than a month. OR
  • You only use your workspace to earn employment income. You also have to use it regularly and continually for meeting clients, customers, or other people while doing your work. 
• Your expenses are used directly in your work and one of the following applies:
  • You have a completed and signed copy of Form T2200S, Declaration of Conditions of Employment for Working at Home Due to COVID-19, from your employer OR
  • You have a completed and signed copy of Form T2200, Declaration of Conditions of Employment, from your employer 

With this method:

• Both salaried employees and commission employees can claim:
  • Electricity, heat, water
  • Utilities portion (electricity, heat, and water) of your condominium fees
  • home internet access fees
  • maintenance and minor repair costs
  • rent paid for a house or apartment where you live
• Commission employees can also claim additional expenses related to:
  • home insurance
  • property taxes
  • lease of a cell phone, computer, laptop, tablet, fax machine, etc. that reasonably relate to earning commission income

Which one should you choose to use to be more beneficial?

The detailed method gives you the option to claim all office expense deductions related to your home workspace. However, it has to be prorated against your eligible home office. In addition, the detailed method cannot be used to claim any mortgage interest payments on the property, furniture, or capital expenses. It’s recommended to consider this method if one of the following conditions apply:

• You were renting in 2020.
• You were a homeowner, but your eligible home workspace sqft. portion is fairly big compare to your total home space sqft (smaller home).
• Out of all, you believe that the total home office expenses in 2020 exceed $400, which is the maximum you can claim under the temporary flat method.