The Globe & Mail published a timely article yesterday about the potential deductions available for employees who have shifted to working from home due to COVID-19.
Our interpretation is consistent with the article. You should be able to deduct a prorated amount of your home office costs as an employment expense. The costs will differ slightly if you are a salaried or commissioned employee:
You can deduct the part of your costs that relates to your work space, such as the cost of electricity, heating, and maintenance (strata fees). However, you cannot deduct mortgage interest, property taxes, home insurance. If your office space is in a rented house or apartment where you live, deduct the percentage of the rent as well as any maintenance costs you paid that relate to the work space.
You can deduct the part of your costs that relates to your work space, such as the cost of electricity, heating, maintenance (strata fees), property taxes, and home insurance. However, you cannot deduct mortgage interest or capital cost allowance. If your office space is in a rented house or apartment where you live, deduct the percentage of the rent and any maintenance costs you paid that relate to the work space.
You may be eligible to deduct other out-of-pocket costs, such as monthly cell phone costs and office supplies (stationary, etc..).
In order to claim employment expenses, your employer must complete form T2200 – Declaration of Conditions of Employment
Question 10 relates to the home-office. Question 9 relates to cell phone use. Question 7 is a “catch-all” section where the employer can write in any specific items you had to purchase out-of-pocket.
As per the CRA, in order to qualify for work-space in the home expenses, you need to meet one of two conditions:
- The work space is where you mainly (more than 50% of the time) do your work.
- You use the work space only to earn your employment income. You also have to use it on a regular and continuous basis for meeting clients, customers, or other people in the course of your employment duties.
As stated, you can deduct a reasonable percentage of you home-office expenses. If you have a dedicated room in your home, the reasonable percentage is the square footage of the home office relative to the total square footage of the home. For example, you work in a 200 square foot room in a 2000 square foot home. The percentage in this case would be 200 / 2000 = 10%. If you end up working from home for 3 months in 2020, or one quarter of the year, then the 10% is be prorated once again to 10% x ¼ = 2.5%.
If you do not work out of a dedicated room, then the reasonable percentage factors in the proportion of time the room is used for employment reasons. Let’s say your “office” is a 300 sq. ft. living room in a 600 sq. ft. apartment, in which you work 8 hours a day, for 3 months of the year. The calculation is (300/600) x (8/24) x (3/12) = 4.16%.
Reasonable is the key word here. You just need to provide the totals to your tax accountant. The prorating will be done by the tax software.
Remember, this applies to the 2020 tax year, which you will not prepare until April 2021. Early 2021 will be the best time to have your employer complete the T2200.