Millions of Canadians unexpectedly had to start working from home due to the COVID-19 pandemic. In response, the government announced plans in their Fall Economic Statement to simplify the process for deducting home office expenses. On December 15, 2020, the Canada Revenue Agency (CRA) released the details on a simplified method for claiming these expenses for 2020. This simplified method has made the home office expense deduction available to more individuals.
We've included an excerpt from the article Deducting home office expenses for 2020 below. This article discusses the circumstances in which home office expenses incurred by salaried and commissioned employees are deductible. You can download the full article here: Deducting home office expenses for 2020
Methods for claiming home office expenses
For 2020, there are two methods for claiming home office expenses on your personal tax return:
1. Temporary flat rate method
2. Detailed method
To be eligible for the temporary flat rate method, you must only be claiming home office expenses (such as electricity, home internet access fees, and office supplies like pens and paper) and not any other employment expenses (such as motor vehicle expenses). In addition, you can only use this method if your employer has not reimbursed you for all of your home office expenses. If you’re in a situation where your employer has reimbursed you for some but not all of these expenses, you can still use this method.
Alternately, the detailed method can be used if you’re claiming other employment expenses in addition to home office expenses, or if you have a larger claim and want to deduct the actual expenses you paid for in order to work from home. The detailed method is more complex, as you will need to separate the expenses that relate to your employment from those that relate to your personal use and keep supporting receipts or documents. Your employer must also complete certain forms in order for you to claim expenses under this method.
The temporary flat rate method
The new temporary flat rate method is a simplified way to claim your home office expenses and can only be used for the 2020 tax year. You are eligible to use this method if you worked from home more than 50% of the time for a period of at least four consecutive weeks in 2020 due to the COVID-19 pandemic. Based on that eligibility, you can claim $2 for each day you worked at home in 2020. The maximum you can claim using this method is $400 (200 working days). If more than one person in your family is working from the same home, each person can make a separate claim.
If you were not required to work from home, but your employer provided you with the choice to do so because of the COVID-19 pandemic and you opted for that choice, the CRA will consider you to have worked from home due to COVID-19.
Qualifying workdays include those you worked either full-time or part-time hours from home. Days off, vacation days, sick leave days and other leaves of absence cannot be counted as workdays.
In using this method, you do not have to calculate the size of your work space or keep supporting documents for your claim. In addition, your employer does not have to complete or sign any forms. You will, however, have to complete “Option 1 – Temporary flat rate method” on Form T777S – Statement of Employment Expenses for Working at Home Due to COVID-19 and attach the form to your personal income tax return. For more information on how to make the claim on your personal tax return, please refer to the CRA website.
The detailed method
Determining your eligibility Under the detailed method, you are eligible to claim a deduction for home office expenses for the period you worked from home, if you meet all of the following criteria:
- You were required to work from home by your employer, or you were given the choice to do so and you opted for that choice, due to the COVID-19 pandemic. Being required to work from home does not have to be part of your employment contract and may be a written or verbal agreement;
- You were required to pay for expenses related to the work space in your home;
- The expenses relate directly to your work during the period; and
- Your work space is where you mainly work (more than 50% of the time) for a period of at least four consecutive weeks. Alternatively, this criteria may be met if you only use your work space to earn employment income and use it regularly and continually for meeting clients, customers or others while doing your work.
Have questions? Please let us know if you have questions about your tax situation or are looking for a tax professional to assist you with your 2020 filing. We are happy to introduce you to one of our trusted connections in the community.