There is good news for those of us working from home, due to the pandemic and under new CRA guidelines we will be able to choose between using a new temporary flat rate (only for 2020) or using the detailed method to claim expenses. This will simplify the process for both employers and employees and will reduce the compliance burden for employers who usually provide T2200 forms to their employees. However these new rules only apply to employees, nothing has changed for those who are self employed working at home. Here are some of the highlights:
Eligibility - to claim this temporary flat rate you must meet all the following conditions:
- You worked from home in 2020 due to the pandemic (this applies even if you chose to work from home).
- You worked from home more than 50% of the time for at least four consecutive weeks in 2020.
- You are claiming home office expenses only and no other employment expenses.
- You were not fully reimbursed by your employer for all of your home office expenses.
How it works: You can claim $2 for each day you worked from home during the four consecutive weeks mentioned above, plus any additional days you worked at home in 2020 because of the pandemic. The maximum you can claim is $400.
Why it is simpler: You don't need to calculate the size of your workspace, keep receipts or ask your employer to complete and sign Form T2200 or Form T2200S a shorter version that can be used if you opt for the detailed method calculate your home office expenses.
How to make the claim: First count the number of days you worked from home in 2020 due to the pandemic including part days and multiply that by $2 per day up to a maximum of $400. You will then use form T777S - Statement of Employment Expenses for Working at Home Due to COVID-19 to enter these amounts and attach it to your 2020 income tax return.
The detailed method to claim expenses is much more complicated.
- You have to have chosen to work from home or your employer required you to work at home.
- You were required to pay for expenses related to your home workspace and directly in your work.
- You must have worked in your home workspace more than 50% of the time or for at least four consecutive weeks, or you used the workspace only to earn employment income.
- You received a signed T2200 or T2200S from your employer.
- You can claim office expenses as well as office supplies but they must be separated between employment and personal use.
- Eligible expenses include rent, electricity, heating, home internet access fees, water, maintenance and minor repairs.
- No eligible expenses include mortgage interest, principal mortgage payments, internet connection fees, furniture and capital expenses.
- To claim utilities, rent and other expenses you need to allocate them reasonably by taking the area of your workspace and divide it by the total finished area of your home. The CRA provides extensive guidance on calculating workspace use. They also provide a comprehensive list of office supplies that are deductible or non deductible.
Should you choose the flat rate or the detailed method? - this will depend on your own personal circumstances. It might make sense to go for the detailed method if you rent your home because included in your rent are expenses such as insurance and property taxes which you cannot claim if you own your own home. For homeowners your eligible expenses may only be utilities so the fixed method may provide a deductions similar to that under the detailed method.
The CRA website or income tax preparer will be able to provide you with more information to help you to decide which method you should use to claim your workspace expenses.
From an article by Margaret Craig-Bourdin