Written by Robin Taub
Thursday, January 28th, 2021
When COVID-19 hit, many employees started working from home: from their kitchens, bedrooms, living and dining rooms. As a result, the Canada Revenue Agency (CRA) created a new, simplified, temporary flat rate method for claiming the deduction for home office expenses for the 2020 tax year. A deduction reduces your net income for tax purposes, which means you pay less tax.
Are You Eligible?
You may be eligible if you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020 or you only use your work space to earn employment income, where you use it regularly and continually for meeting clients, customers, or other people while doing your work.
New Temporary Flat Rate Method
You may be able to claim $2 for each day you worked from home during that period (of at least four consecutive weeks) plus any additional days you worked at home in 2020 due to COVID-19. The new temporary flat rate method is subject to a maximum: you're generally limited to $400 (200 working days) per individual.
Each individual working from home who meets these criteria can use the temporary flat rate method. Multiple people working from the same home can each make a claim.
What Counts as a Work Day?
Days that you worked full-time or part-time hours from home count as a work day. Days off, vacation days, sick days or other days on leave don't count.
What Documentation Do You Need?
You don't need to keep supporting documents, calculate the size of your workspace or get your employer to complete and sign Form T2200S or Form T2200 if you use the temporary flat rate method.
You can find answers to frequently asked questions about this new, simplified method, on the CRA's website.
What If I Want to Claim the Actual Amounts I Paid?
Instead of the new temporary flat rate method, if you're eligible, you may use the detailed (or traditional) method to claim the home office expenses you paid for the period you worked from home.
You may be eligible if you meet certain criteria, including:
- 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.
- You have a completed and signed Form T2200S or Form T2200 from your employer. The CRA will accept an electronic signature on these forms.
- The expenses are used directly in your work during the period.
What Can I Claim Under the Detailed Method?
To find out what qualifies, check the CRA's list of eligible expenses, which includes electricity, heat, water, maintenance and minor repairs, rent and some office supplies. (It's worth double checking that you're not including ineligible expenses like mortgage payments and certain office supplies, which are specifically disallowed. And if you're a commission employee, you may be entitled to claim additional expenses.) It's also worth noting that home internet access fees may be an eligible expense in 2020.
There is a requirement to keep supporting documents for the expenses incurred if the detail method is chosen.
How Do I Calculate My Expenses Under the Detailed Method?
The detailed method is more complicated, since you need to determine the size and use (employment and personal) of your work space in order to calculate your home office expense deduction. Consider getting guidance by using the CRA's calculator or speaking with your tax advisor.
Where Do I Deduct Home Office Expenses on My Tax Return?
Generally, a simplified form T777S should be submitted with your 2020 personal income tax return, whether you use the simplified or detailed method.
Work-space-in-the-home expenses are limited to the amount of net employment income you earn. This means you can't use home work space expenses to create or increase a loss from employment. If you can't deduct all your work space expenses in the year, you can carry them forward and deduct them the following year, as long as you're reporting income from the same employer.