Work From Home Tax Breaks

I covered this topic on The Marilyn Denis show today.  If you'd like to watch the segment, click here (approx 12:30 into the show).

Who qualifies (what is considered working from home)?

As a result of the unprecedented challenges due to COVID-19, many people have been working at home and using their kitchens, bedrooms and living rooms as their work space. In response, the Canada Revenue Agency (CRA) has introduced a new temporary flat rate method to simplify claiming the deduction for home office expenses for the 2020 tax year.

Backgrounder:

  • If you’re a self employed person and have been working out of your home before and during COVID, your expenses and how you’ve filed your taxes likely won’t change.
  • What we’re talking about today is if you’re an EMPLOYEE – salaried or paid a commission – how do your work at home expenses affect your taxes this coming year

Let's break it down by two ways

  • The temporary flat rate method, or
  • The detailed method

As an employee, you may be able to claim a deduction for home office expenses (work-space-in-the-home expenses, office supplies, and certain phone expenses). This deduction is claimed on your personal income tax return. Deductions reduce the amount of income you pay tax on, so they reduce your overall income tax liability.

Eligibility

You are eligible to claim a deduction for home office expenses for the period you worked from home, if you meet all of the criteria:

  • 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
  • have a completed and signed Form T2200S or Form T2200 from your employer (only applicable if the detailed method is used to complete the claim)
  • the expenses are used directly in your work during the period

What tax credits can you qualify for?

The new temporary flat rate method simplifies your claim for home office expenses. You are eligible to use this new method if you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020 due to the COVID-19 pandemic. You can claim $2 for each day you worked from home during that period plus any additional days you worked at home in 2020 due to the COVID-19 pandemic. The maximum you can claim using the new temporary flat rate method is $400 (200 working days) per individual.

Each individual working from home who meets the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses. This means multiple people working from the same home can each make a claim.

This method can only be used for the 2020 tax year.

How do you qualify for them (what do you need to showcase when filing your taxes)

If you are using Temporary flat rate method , you do not need to determine your expenses to calculate your claim for home office expenses in 2020.

The temporary flat rate method is used to claim home office expenses that you paid like rent, electricity and home internet access fees, as well as office supplies like pens and paper, and cell phone minutes.

If you use the temporary flat rate method, you cannot claim any other employment expenses (for example motor vehicle expenses).

If you are not using the temporary flat rate method, then

Detailed method

If you are claiming the employment portion of actual amounts you paid, you use the Detailed method  to determine the amount of work-space-in-the-home expenses you can claim. You must separate the expenses between your employment use and non-employment (personal) use of your home.

To determine if you are eligible, refer to: Eligibility criteria - Detailed method

Where can you find out more?

Visit the government’s website:  Canada.ca for the latest along with helpful calculators to determining if you should use the flat rate or detailed rate, forms you need to fill out and check lists we mentioned.

I've written a book to help you feel good about money!