COVID-19 CRA Home Office Expenses

COVID-19 CRA Home Office Expenses

The Canada Revenue Agency (CRA) recently released comprehensive information on two new, more streamlined options for employees to claim deductions for employment expenses related to working from home during the COVID-19 pandemic. For millions of Canadians, this is the first year in which they are eligible to deduct certain expenses related to working from home on their taxes.

The two new COVID-19 specific options for employees to claim a deduction are (outlined further below):

A) the Temporary Flat Method; and
B) the Detailed Method

This article has been divided into the following sections:

1. New changes this tax season
   a) New Temporary Flat-rate Method
   b) New Detailed Method
2. A comparison of the two claim methods
3. How to determine your work-space use?
4. Which expenses can you claim?
5. How to calculate your expenses?
6. How to claim the expenses?

1. New changes this tax season

This section describes the recent changes to claiming expenses for workspace in the home.

a. New temporary flat rate method

Eligibility Criteria
Each individual working from home who meets the eligibility criteria (below) can use the temporary flat rate method to calculate their deduction for home office expenses. This means multiple people working from the same home can each make a claim.

To use the Flat Rate Method to claim the home office expenses you paid, you must meet all the following conditions:

• You worked from home in 2020 due to the COVID-19 pandemic
  • If you were not required to work from home, but your employer provided you with the choice to work at home because of the COVID-19 pandemic, the CRA will consider you to have worked from home due to COVID-19
• You worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020
• You are only claiming home office expenses and are not claiming any other employment expenses
• Your employer did not reimburse you for all of your home office expenses
• If your employer has reimbursed you for some of your home office expenses, you can still use the temporary flat rate method, if you meet the eligibility criteria
• This method can only be used for the 2020 tax year.

Simplified Process:

b. New temporary flat rate method
You can use the detailed method to claim the home office expenses you paid for the period that you worked from home.

Eligibility Criteria
To claim the actual expenses, you paid for working from your home, you must meet all the following conditions:

• One of the following applies:
  • You worked from home in 2020 due to the COVID-19 pandemic, or
  • If you were not required to work from home, but your employer provided you with the choice to work at home because of the COVID-19 pandemic, the CRA will consider you to have worked from home due to COVID-19
• You were required to pay for expenses related to the workspace in your home
  • If your employer reimbursed you for some of your home office expenses, you could still use the detailed method if you meet the eligibility criteria, but you cannot claim any expenses that were or will be reimbursed by your employer
• One of the following applies:
  • Your workspace is where you mainly (more than 50% of the time) work for a period of at least four consecutive weeks. The period can be longer than a month; or
  • You only use your workspace to earn employment income. You also have to use it regularly and continually for meeting clients, customers, or other people while doing your work
• Your expenses are used directly in your work
• One of the following applies:
  • You have a completed and signed copy of Form T2200S, Declaration of Conditions of Employment for Working at Home Due to COVID-19, from your employer; or
  • You have a completed and signed copy of Form T2200, Declaration of Conditions of Employment, from your employer
• Note: You cannot claim any expenses that were or will be reimbursed by your employer. Keep a copy of Form T2200S or Form T2200, in case CRA asks to see it
• You need to meet all of the above conditions to be eligible to claim your home office expenses

What are Form T2200S and Form T2200 ?
Form T2200S
Form T2200S – Declaration of Conditions of Employment for Working at Home Due to COVID-19 is a shorter version of Form T2200 that your employer will use if you worked from home in 2020 due to the COVID-19 pandemic and choose to use the Detailed method to calculate your home office expenses. Your employer fills out this form upon request to certify that you worked from home in 2020 due to the COVID-19 pandemic and were required to pay for some or all of your home office expenses used directly in your work while carrying out your duties of employment during that period.

Form T2200
Form T2200 – Declaration of Conditions of Employment is a form your employer fills out to certify the conditions of employment and were required to pay for employment expenses.

Who can sign Form T2200 and Form T2200S?
Form T2200 and Form T2200S must be signed by your employer. It is up to your employer to determine who is authorized to sign these forms.

2. Comparison of the two methods

3. How to determine your work-space use?

Temporary flat rate method
If you are using the Temporary flat rate method, you do not need to determine the size of your work space to calculate your claim for home office expenses in 2020.

Multiple employees 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
You will need to determine the size and use (employment and personal) of your work space to calculate your claim for work-space-in-the-home expenses.

Determine the percentage of your home that you use as a workspace, using this formula:

This CRA calculator will perform this calculation for you.

Change of workspace
If you use different workspaces in your home, or you move to a new property, you will need to claim the expenses you paid for each workspace separately. This is due to changes in the size and type of the workspace, or finished area of the home.

4. Which expenses can you claim?

Temporary Method
If you are using Temporary flat rate method, you do not need to determine your expenses to calculate your claim for home office expenses in 2020.
If you use the temporary flat rate method, you cannot claim any other employment expenses (for example motor vehicle expenses).

Detailed Method
If you are claiming the employment portion of actual amounts you paid, you use the Detailed method to determine the amount of work-space-in-the-home expenses you can claim. You must separate the expenses between your employment use and non-employment (personal) use of your home.

Work-space-in-the-home expenses
If you meet the eligibility criteria, you can claim a portion of certain expenses related to the use of a workspace in your home.
Commission employees who sell goods or negotiate contracts (typically have an income amount in box 42 on their T4 slip), can claim some expenses that salaried employees cannot.

Office supplies and phone expenses
If your employer requires you to pay for office supplies or certain phone expenses, you may be able to claim those expenses.

Although you can claim these expenses, they are not related to the physical workspace in your home. They are claimed on a different section of Form T777S or Form T777.

Limitations on work-space-in-the-home expenses
The work-space-in-the-home expenses you can claim are limited when:

• If you work only a part of the year from your home:
  • You can only claim the expenses you paid in the part of the year you worked from home. You cannot claim the expenses you paid for the whole year.
• If you have multiple income sources:
  • You can claim work-space-in-the-home expenses only from the income the expenses relate to, and not from any other income.
• your expenses exceed your income:
  • The amount you can claim for work-space-in-the-home expenses is limited to the amount of employment income that is left after you have deducted all other employment expenses.
  • This means that you cannot use work-space-in-the-home expenses to create or increase a loss from employment.
  • If you cannot claim all your work-space-in-the-home expenses in the year, you can carry forward the expenses.
  • You can claim these expenses in the next year as long as you are reporting income from the same employer.
  • However, you cannot create or increase a loss from employment by carrying forward work-space-in-the-home expenses.
  • If you are a commission employee, you may not be able to claim your total work-space-in-the-home expenses if they exceed your commission income.
    • To learn more, refer to: T4404 – Chapter 2 – Employees earning commission income

5. Which expenses can you claim ?

Answer a few questions on the CRA website here to begin calculating your home office expenses.

6. How to claim the expenses?

How to claim
This deduction is claimed on your personal income tax return. Deductions reduce the amount of income you pay tax on, so they reduce your overall income tax liability.

Temporary flat rate method
This method simplifies your claim for home office expenses (work-space-in-the-home expenses and office supply and phone expenses). If you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020 due to the COVID-19 pandemic, you could claim $2 for each day you worked from home during that period.

You can then also claim any additional days you worked at home in 2020 due to the COVID-19 pandemic. The maximum amount that can be claimed is $400 per individual. This method can only be used for the 2020 tax year.

Detailed method
Fill in the applicable form
Tip: Use the CRA calculator to determine the employment-use amount to enter on Form T777S or Form T777.

For more information on the various government assistance programs during COVID-19, click here.

¹Utilities portion (electricity, heat, and water) of your condominium fees

• You can claim a portion of your monthly condominium fees if you can calculate the portion of the fees that relates to the electricity, heat, and water you used within your personal unit using a reasonable basis.
• If you paid the electricity, heat, and water consumed within your personal unit directly to service providers, no portion of your condominium fees is deductible.
• To calculate the reasonable portion of the condominium fees that you can claim, you may need to contact the condominium administrator to obtain the following information:
  • Cost of the eligible services (electricity, heat, water) paid by the condominium administrator for the whole condominium building for the current or previous year
  • Total condominium fees paid by all co-owners for the same year
• Using the total condominium fees you paid for your unit for the period you were working from home, you can calculate the reasonable portion of your condominium fees used to pay for electricity, heat, and water using this formula:

²Home internet access fees

• Can claim monthly home internet access fee (the cost of the plan must be reasonable)
• Cannot claim connection fees
• Cannot claim the portion of fees related to the lease of a modem/router

³Maintenance and minor repair costs
The maintenance and minor repair costs generally fall into one of the following categories:

• Expenses you paid that relate to the workspace as well as other areas of the home. You can claim the percentage of those expenses that relate to the workspace.
  • Example: Minor repairs of the home furnace or air-conditioner or the purchase of household cleaning products.
• Expenses related to the workspace only. You could claim the total amount of the expenses if the amount paid is reasonable.
  • Example: Purchase of light bulbs, repainting the workspace, or repairing walls or ceilings after the installation of phones, fax machines or other office equipment you used in the workspace.
• Expenses related to a part of the house that you did not use as a workspace. You cannot claim any part of those expenses.
  • Example: Repainting a bedroom that is not used for work.

⁴Rent paid for a house or apartment where you live

• If you rent your home, you can claim a reasonable portion of the rent related to the workspace.
• If you own your home, you cannot claim the rental value of the workspace in your home.

⁵Capital expenses

• Cannot claim the renovations and expenses that extend the useful life of a property or improve it beyond its original condition.
• Example: Changing a furnace, changing a window or improving the flooring of a room.

Baber Rahim, Tax Law Clerk & JD Candidate

© Kalfa Law, 2021

The above provides information of a general nature only. This does not constitute legal advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.