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Canada: Claiming Home-Office Expenses On Your Tax Return

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Written by Crowe MacKay LLP, February 14, 2022.

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 may claim their home-office expenses in 2020 and have extended them for the 2021 and 2022 tax years.

Home-Office Expense Eligibility

To be eligible to claim home-office expenses as an employee under the new temporary methods you must have:

  • Worked from home in 2020, 2021, or 2022 due to COVID-19
  • Worked from home for at least 50% of the time for at least four consecutive weeks during the particular year
  • Not been reimbursed by your employer for your home-office expenses
  • Incurred your expenses directly for work purposes

Allowable Expenses

Can be Claimed by Salary & Commission Employees

These expenses can be claimed by all salary 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

Can be Claimed by Commission Employees Only

These expenses can be claimed by commission employees only:

  • Home insurance
  • Property taxes
  • Lease of:
    • Cell phone
    • Computer
    • Laptop
    • Tablet
    • Fax machine

Cannot be Claimed by Salary or Commission Employees

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 temporary methods employees can choose from when claiming home office expenses on their tax returns:

  1. Temporary Flat-Rate Method
  2. Simplified Detailed Method

Using either method is currently allowed for the 2020, 2021, and 2022 tax years.

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. The use of this method is described below.

  • Employees may claim $2 for each day worked from home
  • The maximum amount that can be claimed is $400 or 200 working days per individual in 2020 and $500 or 250 working days per individual in 2021 and 2022
  • Working days can include full-time and part-time days worked from home
  • Vacation days, sick days, or other leaves or absences cannot be claimed

T777S Form Required

When using the Temporary Flat-Rate Method employees are required to submit a T777S form to calculate their home-office expenses.

Download a fillable PDF T777S form

Detailed Method

The Detailed Method requires employees to provide more details as they can claim their actual home-office expenditures. Details that employees must provide 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 completed T777S form
  • A signed T2200S form by the employer

Please be advised that the above linked forms are for the 2021 tax year only.

Should you complete a T777 or T777S form?

When claiming actual amounts paid you must complete a T777 or T777S form. Details on each are described below.

  • Complete a T777 if you are claiming home-office expenses and are claiming other employment expenses (for example, motor vehicle), as well as home (workspace in the home, office supplies, and certain phone expenses.)
  • Complete a T777S if you are claiming the actual amount paid as a result of working from home due to COVID-19 and are not claiming any other employment expenses.

Your Crowe MacKay advisor can complete the relevant form for you when preparing your return.

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.

Neither the T2200 or T2200S form needs to be filed with your tax return but the form should be kept for your records.

CRA is accepting electronic signatures 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.

Reference site: https://www.mondaq.com/canada/employee-benefits-compensation/1160980/claiming-home-office-expenses-on-your-tax-return?email_access=on