The impacts of the COVID-19 pandemic resulted in a large portion of Canada's workforce transitioning to a work-from-home environment. Because of this, the Federal Government introduced temporary changes to how employees claim their home office expenses.
Home-Office Expense Eligibility
To be eligible to claim home-office expenses an employee under the new temporary methods you must have:
- Worked from home in 2020 due to COVID-19
- Worked from home for at least 50% of the time for at least four consecutive weeks during 2020
- Not been reimbursed by your employer for expenditures
- Incurred your expenses directly for work purposes
These expenses can be claimed by all salaried employees and commission employees
- Electricity
- Heat
- Water
- Utilities portion of your condominium fees (electricity, heat, and water)
- Home internet access fees
- Maintenance and minor repair costs
- Rent paid for a house or apartment where you lived
These expenses can be claimed by commission employees only
- Home insurance
- Property taxes
- Lease of:
- Cell phone
- Computer
- Laptop
- Tablet
- Fax machine
Expenses that cannot be claimed by salary or commission employees:
- Mortgage interest
- Principal mortgage payments
- Home internet connection fees
- Furniture
- Capital expenses (replacing windows, flooring, furnace, etc.)
- Wall decorations
Claiming Method Options
There are two new temporary methods employees can choose from when claiming home office expenses on their tax returns:
- Temporary Flat-Rate Method
- Simplified Detailed Method
Crowe MacKay's tax advisors review the details of each below.
Temporary Flat-Rate Method
The Temporary Flat-Rate Method is the simpler of the two methods to use when calculating your home-office expenses. It is calculated as follows:
- Employees receive $2 for each day worked from home
- The maximum amount that can be claimed is $400 or 200 working days per individual
- Work days can include full-time and part-time days worked from home
- Vacation days, sick days, or other leaves or absences cannot be claimed
Simplified Detailed Method
The Simplified Detailed Method requires employees to obtain more documentation as they can claim their actual home expenditures. Details employees must obtain include:
- Type of workspace: is the employee working in a common area (i.e. kitchen) or designated workspace (i.e. home office)
- Size of workspace: what is the size of the home and workspace used
- A signed T2200 or T2200S form by the employer
Do I need a T2200 or T2200S form?
The main differentiating factors between the T2200 and T2200S forms are:
- T2200 is needed if an employee has other employment expenses such as travel or supplies they would like to claim.
- T2200S is designed specifically for employees only claiming home office expenses because of COVID-19.
Using the Simplified Detailed Method and/or the Temporary Flat-Rate Method is currently only allowed for filings of 2020 tax returns.
Due to the restrictions in local markets, the CRA is accepting electronic signatures this year on forms T2200 and T2200S to ensure the health and safety of Canadians.
Which method is best?
When determining if an employee should use the Temporary Flat-Rate Method or the Simplified Detailed Method, it's important to understand that each individual's' situation is unique and needs to be reviewed on a case-by-case basis. There are factors that will impact which method you choose including if you rent or own your home, as well as if you want to claim automobile expenses (to do this you must use the traditional Simplified Detailed Method). The Simplified Detailed Method is more complex and the employee is responsible for maintaining their records, while the Temporary Flat-Rate Method does not require keeping receipts. It is recommended that you contact your Crowe MacKay advisor to discuss which method best suits your individual circumstance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
