The Covid-19 pandemic has normalized remote work as many employees made the abrupt shift to working from home.
But what you buy to hold down a job such as a personal computer, office supplies and additional cost of utilities as you work from home comes from your pocket.
The government recognized the cost of this ‘new normal’ way of working during the lockdowns by allowing eligible employees to claim certain deductions for home office expenses for the 2020 tax year. It aims to reduce the amount of taxable income earned through your employment all year long.
The best part: as a work from home employee, you can deduct a wide range of expenses, from work-space-in-the-home expenses to office supplies. And everyone who works from the same home can each make a claim as long as they meet the criteria.
Who is Eligible?
You can claim eligible expenses that are not or will not be reimbursed by your employer, as long as—
You have a designated workspace and you use it mainly for work. Meaning, you should have spent more than 50% of the time working from home, while performing all of the duties that you normally perform at your regular place of employment for a minimum of four consecutive weeks.
You are not claiming any other employment expenses aside from the home office expenses deduction.
You are required by your employer to work from home because of Covid-19.
How to Claim the Home Office Expenses
The new method allows you to claim deductions without having to get certain tax forms signed by your employers. The work-from-home tax forms, such as Form T2200S and Form T777S are easy to use and you can use the CRA calculator to compute your eligible home expenses.
You can use any of these two methods when claiming tax deductions:
1) New Temporary Flat Rate Method
If you do not want to bother computing the wide range of expenses, from costs of rent, electricity and internet access to office supplies and cell phone expense, use the flat rate method.
You can simply claim a deduction of $2 for each day you worked from home due to the pandemic. The maximum deduction you can take advantage of is $400. However, the moment you use the temporary flat rate method, you are already waiving your right to claim any other employment expenses such as gas/mileage.
Also, whether your employer reimbursed your home office expenses, in full or part, you can still use the temporary flat method. Furthermore, your employers don’t have to sign certain tax forms for you to be eligible.
2) Detailed method
If you want to claim deductions for every cent you spent while working from home, or you have larger claims for home office expenses, you can still use the detailed method. But, you can only deduct home expenses directly related to your work.
Typical Top Tax Deductions for Employees Working from Home
As an employee required by your employer to work from home because of Covid-19, you can take advantage of the following deductions:
Utilities (electricity, water and heat)
Internet
Maintenance and minor repair costs of your workspace
Rent for a house or apartment where you live and work.
Important Considerations:
The CRA allows you to claim the expenses you paid for your work-space-in-the-home expenses during the period you worked from home. So, if you did not work from home for the whole year, you can only claim a deduction for the expenses you paid for that part of the year.
You can only claim work-space-in-the-home expenses for what is needed to do the job, for example, a stable internet connection or a printer. So, if you have two or more jobs at a time, or you also have a business on the side, check if the deduction for the expense you are claiming is related to your employment.
Fully deductible expenses are those that are exclusively used in the performance of your job that your expenses relate to. For example, computer equipment, and office supplies constitute home office expenses when you are required by your employer to pay for them.
Your expenses cannot exceed your income. If it does, you can carry forward the expenses in the next year as long as it is with the same employer.
The threat of Covid-19 still continues and many businesses resort to flexible work arrangements to prevent the spread of infection; while managing to survive and thrive amid this difficult time.
Do you think you are eligible for the temporary work-from-home tax deductions? Talk to us today and we will guide you on how to make the most of this new amendment.