We would like to provide you with an update on the work-from-home tax saving options available for the 2020 tax year. Those who worked from home in 2020 will have to decide whether to use the $2 a day flat-rate or detailed method. At tax time, you can use our employment expenses checklist which will help you list your expenses.
Please click here to view the full CRA details on employment expenses.
Many people, especially renters, will be better off using the detailed method. For example, if your rent is $2,000 a month, you worked from home for 10 months, and your home-office percentage is 10%, that’s already a $2,000 deduction.
The “Flat-Rate” Method
The Canada Revenue Agency (CRA) has introduced a temporary “flat-rate” method to calculate your home office expenses for 2020 for employees who worked from home in 2020 due to COVID-19 and paid home office expenses for which they were not reimbursed. If you use this method, your employer is not required to complete form T2200 or T2200S.
The “flat-rate” option will allow you to deduct $2 per day you worked from home, to a maximum $400. If you worked from home since March and work five days a week, you’ll be able to claim the full $400.
The Detailed Method
The detailed method is the standard method for claiming employment expenses. To use the detailed method, you need your employer to complete Form T2200 or the simplified T2200S. You must also itemize your various expenses.
- rent paid for a house or apartment where you live
- electricity, heat, water or the utilities portion of your condominium fees
- home internet access fees
- maintenance (minor repairs, cleaning supplies, light bulbs, paint, etc.)
- supplies (stationery items, pens, folders, sticky notes, postage, toner, ink cartridge, etc.)
- employment use of a basic cell phone service plan
- long distance calls for employment purposes
If you are a commission employee, you can also claim expenses that reasonably relate to earning commission income for the following:
- property taxes
- home insurance
- lease of a cell phone, computer, laptop, tablet, fax machine, etc.
Non-eligible expenses. You cannot claim any of the following:
- capital cost allowance
- mortgage interest
- principal mortgage payments
- home internet connection fees or the portion of fees related to the lease of a modem/router
- capital expenses (replacing windows, flooring, furnace, etc.)
- office equipment (printer, fax machine, briefcase, laptop case, or bag, calculator, etc.)
- monthly basic rate for a landline telephone
- cell phone connection, or license fees
- purchase of a cell phone, computer, laptop, tablet, fax machine, etc.
- computer accessories, (monitor, mouse, keyboard headset, microphone, speakers, webcam, router, etc.)
- other electronics (television, smart speaker, voice assistant, etc.)
- furniture (desk, chair, etc.)
Remember that whether you are salaried or commissioned, there is always the possibility that the CRA will request verification of your expense claims, so you will need to keep your receipts for 7 years, just in case. Failure to verify a claim could mean tax owing and interest charges.
Again, please note that we will have a specific tax checklist you’ll be able to complete for work-from-home expenses at tax time.
If you are unsure which work-from-home option is best for you, talk to us. We can help you determine how best to proceed.
Source: Canada Revenue Agency