Home office expense deductions explained

December 21, 2020

Home office expense deductions explained

Synopsis
4 Minute Read

The governments of Canada and Quebec have introduced simplified expense claims for people working from home due to COVID-19.

2021 Update: As announced by the Federal Government in its 2021 Fall Economic and Fiscal Update, the simplified rules for deducting home office expenses introduced in 2020 will be extended to the 2021 and 2022 tax years. Both the temporary flat rate method and the detailed method continue to be available, with the maximum claim under the temporary flat rate method increased to $500 (from $400). In addition, employees now have the option to carry forward an amount of home office expenses from the previous taxation year (through Form T777S Statement of Employment Expenses for Working at Home Due to COVID-19).

Consistent with the Federal Government’s changes, Quebec has also increased the maximum claim amount under the temporary flat rate method to $500 for 2021.

The Federal Government has provided additional guidance with respect to employees deducting home office expenses for the 2020 tax year due to the COVID-19 pandemic. If an employee meets the eligibility criteria, there are now two options to calculate the deduction:

  • A temporary flat rate method, or
  • The detailed method which involves using the simplified form, T2200S, Declaration of Conditions of Employment for Working at Home During COVID-19

Eligibility

An individual is eligible to claim a deduction for home office expenses for the period worked from home, IF the following criteria are met:

  • The employer required the individual to work from home, or the individual chose to work from home due to the COVID-19 pandemic;
  • The individual worked more than 50 percent of the time from home for a period of at least four consecutive weeks in 2020 due to COVID-19;

Options

Temporary Flat Rate Method

The new temporary flat rate method simplifies an employee’s claim for home office expenses. Eligible individuals may claim $2 for each day worked (either full-time or part-time hours) from home in 2020 due to the COVID-19 pandemic. The maximum claim using this new method is $400 (200 working days x $2) per individual.

There is no calculation of workspace size, no requirement to keep documents to support the claim and no requirement for a completed Form T2200, Declaration of Conditions of Employment, signed by an employer. Where multiple employees are working in the same home, each employee working from home who meets the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses.

Detailed Method

Employees with larger claims for home office expenses may instead choose to use the detailed method to calculate their home office expenses deduction in 2020. For these individuals, the Canada Revenue Agency (CRA) has created a simplified Form T2200S, a shorter version of Form T2200 that must be completed and signed by the individual’s employer. For the 2020 tax year only, the CRA will accept an electronic signature on these forms.

Employees using the detailed method will need to determine the size and use (employment and personal) of their workspace. For assistance with claiming the home office expense deduction, the CRA has created an online calculator taxpayers can access. The CRA has also expanded the list of eligible expenses that can be claimed to include home internet access fees, creating a comprehensive list for claimants. Employees must retain documents supporting the claim under this option.

The CRA has also created a simplified Form T777S, Statement of Employment Expenses for Working at Home Due to COVID-19, to be used by employees to submit their claim under either option.

Provincial Announcements

The Government of Québec has aligned itself with this federal initiative. Eligible individuals may claim $2 for each day worked from home in 2020 due to the COVID-19 pandemic. The maximum claim using this new method is $400 (200 working days) per individual. To reduce the administrative burden on businesses, Revenu Québec will also launch an online service in early 2021 that will facilitate the production of large numbers of forms to send to teleworkers. Further information can be found at Revenu Québec FAQ for Businesses and FAQ for Individuals.

For more information or assistance with these forms, please contact your local MNP Business Advisor.

What Does This Mean?

The COVID-19 pandemic has dramatically increased the number of Canadians working from home. The Federal Government has recognized the need for simplified reporting of home office expenses and reducing the burden on employers of completing Form T2200 in its traditional format. MNP continues to provide insights to governments to ensure the needs of Canadians and Canadian businesses are met.

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