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Working From Home 2020 Income Tax Deductions

With the new challenges faced during 2020 with Covid-19, many employers have transitioned to working remotely by having employees perform their duties from home. New for 2020, CRA has introduced a simplified method for eligible employees to deduct expenses related to working from home.

Eligibility

All of the following criteria must be met for eligibility to use the simplified or detailed method:

  •  you worked from home in 2020 due to the COVID-19 pandemic or your employer required you to work from home
  • you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020
  • Completion of Form T2200S, signed by your employer (click here to access a fillable form T2200S) (Only applicable if electing to use the detailed method)

Simplified Method

For 2020, a flat rate of $2 per day can be claimed as a deductible expense up to a maximum of $400 (200 working days). A work day counts as a day worked from home, either full time or part time hours. Days that do not count are days off, sick days, vacation days, or any other leave or absence. If the taxpayer elects to use this method, they will not be allowed claim any other home office expenses in line 22900.

There is no household limit for this claim. For example, if you and your spouse both work from home during the year and meet all of the eligibility criteria, you may both claim $2 each per day worked at home.

Detailed Method

The detailed method can be selected to deduct home office expenses for the period worked from home instead of the new simplified method. It may be more beneficial to use this method to achieve greater tax savings. CRA provided an online calculator to help taxpayers determine the amount of home office expenses they may deduct under this method. The calculator can be accessed by clicking here.

A comprehensive list for eligible deductible home office expenses using the detailed method can be accessed by clicking here.

Eligible individuals must provide completion of Form T2200S, signed by your employer (click here to access a fillable form T2200S)

Salaried and commission employees can claim the following:

  • electricity
  • heat
  • water
  • utilities portion of condominium fees (must be reasonable and part of your condominium fees, cannot be deducted if paid separately to a service provider)
  • home internet (monthly home internet fees can be claimed, however connection fees and fees related to the lease of a modem/router cannot)
  • maintenance and minor repair costs (Expenses must only be related to the workspace. Expenses which cover the household, such as home furnace and air conditioning repair, can only be deducted as a percentage of the area covered by the workspace)
  • rent (only a reasonable portion related to the workspace).

Commission employees can deduct the following additional expenses:

  • home insurance
  • property taxes
  • the lease of any equipment (such as cell phone, computer, laptop, tablet etc) that relate to earning commission income.

Capital expenses made to the household, such as expenses which extend the useful life of the property or improve it beyond its original condition, cannot be claimed.

There are a few limitations to be aware of:

  • You work only part of the year from your home – you may only claim expenses you paid for the part of the year you worked from home.
  • You have multiple sources of income – you can only claim home office expenses only from the income the expenses relate to; these expenses cannot be claimed against other sources of income.
  • Your expenses exceed your income – the amount you can claim for work-space-in-the-home expenses is limited to the amount of employment income that is left after you have deducted all other employment expenses. This means that you cannot use work-space-in-the-home expenses to create or increase a loss from employment. If you cannot claim all your work-space-in-the-home expenses in the year, you can carry forward the expenses. You can claim these expenses in the next year as long as you are reporting income from the same employer. However, you cannot create or increase a loss from employment by carrying forward work-space-in-the-home expenses. Commissioned employees may not claim home office expenses if they exceed commission income.

Sources

https://www.canada.ca/en/revenue-agency/news/2020/12/simplifying-the-process-for-claiming-a-deduction-for-home-office-expenses-for-employees-working-from-home-due-to-covid-19.html

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-229-other-employment-expenses/work-space-home-expenses/how-claim.html

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