Your $400 home office tax deduction
HOW-TO-LIST CRA creates new, simpler ways to claim
OTTAWA• Has the COVID-19 pandemic had you stuck working at home for at least four weeks this year? Then you may be eligible for a tax deduction and the Canada Revenue Agency has created new, simpler ways for you to claim it.
As of October, up to 2.5 million Canadians were known to be working from home, according to CRA officials speaking during a technical briefing for media. That's significantly more than the roughly 750,000 who deducted work-fromhome expenses from their income last year.
That also means the CRA expects “several times more” Canadians than usual to file for that type of tax deduction, a normally “somewhat burdensome and disruptive administrative process,” one agency official noted.
So on Tuesday, CRA announced two new ways (in addition to the existing one that remains) to claim those precious deductions, including a one-year-only flat rate, no-proof-nor-paperwork-required method that allows a maximum claim of $400.
Q Wait, so you're telling me I can lower my tax bill just because I'm working from home now?
A Pretty much! For those working from home because of COVID-19, there are now two ways to file for these tax deductions: the easy, document-and-stress-free way that is limited to a maximum of $400, and the “simplified” long way for larger claims.
Q And … the CRA is just going to let me claim up $400 in home office expenses, no questions asked?
A Well, yes and no. To be eligible for the “simplified” fast track method, you have to have spent over half of your working hours labouring at home during a period of at least four consecutive weeks in 2020 because of the COVID-19 pandemic. If you hit that threshold, you can claim $2 for each day you worked at home, for a maximum of $400 per member of the household.
Q But what if my home office expenses during COVID-19 were way higher than just $400?
A If that's the case, then you'll want to file the “detailed” report which will require you to get two forms from your employer: the new T2200S and the new T777S (which are just simplified versions of the regular forms).
The first is a form with three questions that certify that you worked from home because of COVID-19 and that you paid out of pocket for some or all of your home office expenses. Form T777S serves as proof from your employer of your working conditions and what you were required to pay
Q Yay, paperwork! How exciting… So then what can I claim through the detailed method?
A A whole bevy of things! If you're a renter who has a home office room for example, you can claim a portion of your rent during the weeks working from home equal to the percentage of total space occupied by your workspace. So if your apartment is 1,000 sq. ft. and your office is 200 sq. ft., you can claim 20 per cent of your rent as a home office expense.
Anyone can also claim a portion of the cost of utilities (electricity, heat, water, Internet) for their office space, as well as “maintenance and minor repair costs” done in the space. But keep in mind that CRA may ask to see receipts for all of this.
Unfortunately for homeowners, mortgage payments and interest cannot be claimed, nor can furniture and capital expenses either.
AS OF OCTOBER, UP TO 2.5 MILLION CANADIANS WERE KNOWN TO BE WORKING FROM HOME,
Q What about office supplies?
A The CRA thought about that too, and created an updated list of specific items that can also be claimed, as long as they served for work and not for personal use. The complete list can be found on the Agency's website.
Q Wait, but the list says I can expense the purchase of envelopes, folders and highlighters, but not charging cables, a computer mouse or a webcam? What is this, 1974?
A Yeah, well… yeah. “That's what's in the law” is essentially what CRA says. Next question.
Q Honestly, this all sounds like a lot of paperwork for employers of Canadians who will make detailed expense claims, no?
A Yup. See answer above.
Q What if my employer already had me working from home before the pandemic began?
A In that case, it's business (at home) as usual. Your employer has to provide you with the full T2200 and T777 forms, which you must submit to the CRA when you file your taxes.
Q OK, this is all interesting, but I want to figure out how much I can claim. Is there a way I can do that?
A In fact, there is! Tuesday, the CRA put a handy home office expenses calculator on its website. Just answer a few questions about your employment situation, your home office setup and any work expenses, and the calculator will tell you the likely amount of total expenses you can claim on your 2020 tax filings.