Deducting work from home expenses

After the pandemic work from home has become the new normal. You are eligible to claim deductions for expenses incurred in the tax year for the use of a workspace in your home for employment purposes. There are certain criteria that you need to meet which include –

• The workspace should be where you primarily conduct your work, with "primarily" defined as more than 50% of the time.
• It must be dedicated solely to earning your employment income and used consistently and routinely for meeting clients, customers, or other individuals as part of your employment responsibilities.

The Canada Revenue Agency (CRA) introduced specific measures for deducting work-from-home expenses during the COVID-19 pandemic. To deduct work-from-home expenses while filing taxes in Canada, you generally need to follow these guidelines –

Eligibility Criteria

• You must have been required to work from home due to COVID-19 for a significant portion of the year.
• You must have incurred eligible expenses as a result of working from home.

Using the T2200S Form

• Your employer should provide you with a completed T2200S form, which is the "Declaration of Conditions of Employment for Working at Home Due to COVID-19." This form is a simplified version of the regular T2200 for the specific purpose of claiming home office expenses during the pandemic.

Expenses You Can Deduct

• With the T2200S form, you can claim up to $500 in employment expenses as a flat-rate deduction, without the need to provide detailed receipts. This is meant to simplify the process.
• If you have eligible expenses that exceed $500, you can still claim them, but you'll need to provide supporting documentation, such as receipts and invoices.

Eligible Expense

• Common eligible expenses include a portion of your rent or mortgage interest, utilities, property taxes, home internet, and office supplies. Expenses related to a dedicated workspace used solely for employment purposes may also be eligible.

Calculating Deductions

• If you're claiming the flat-rate deduction of up to $500, you simply enter this amount on your tax return.
• If you have expenses exceeding $500, you can calculate the eligible amount based on the proportion of your home used for work and the specific expenses incurred.

Documentation

• Keep records of your expenses and the completed T2200S form for your records in case the CRA requests verification.

Consult a Tax Professional

• Tax rules and regulations can change, so it's advisable to consult with a tax professional or review the most recent CRA guidelines when filing your taxes.

Please note that tax regulations can change over time, and this information is based on the rules in place as of September 2021. Always consult the latest guidance from the CRA or seek advice from a tax professional to ensure you are correctly deducting work-from-home expenses on your tax return in the current tax year.

What can be deducted?

in Canada, you can deduct certain expenses related to working from home if you meet specific eligibility criteria. These deductions are subject to the rules and guidelines set forth by the Canada Revenue Agency (CRA). While the rules and guidelines may have evolved since then, here are some common expenses that may be deductible when working from home.

• Home Office Expenses: You can deduct a portion of your rent or mortgage interest, property taxes, and utilities (such as electricity, heating, and water) that relate to your home office space. The deduction is based on the proportion of your home used for work.
• Internet and Phone Expenses: You can deduct a portion of your internet and phone expenses that are used for work purposes. Again, this deduction is based on the portion used for work.
• Office Supplies: Expenses related to office supplies (e.g., paper, pens, printer ink) that you use for work may be deductible.
• Computer and Equipment: If you purchased a computer or other equipment necessary for your job, you may be able to claim depreciation or a portion of the cost as a deduction.
• Maintenance and Repairs: Costs associated with the maintenance and repair of your home office area, such as painting or minor repairs, may be deductible.
• Property Insurance: A portion of your property insurance premiums may be deductible if you use your home for work.
• Home Office Furniture: The cost of purchasing or maintaining office furniture used in your home office, such as a desk or chair, may be deductible.

There are specific rules and requirements for claiming these deductions –

• Your home office must be your principal place of employment, meaning it's where you conduct most of your work.
• You must have a completed T2200S or T2200 form from your employer, depending on the tax year, to support your deductions.
• Expenses must be reasonable and directly related to your work.
• You generally cannot deduct expenses that your employer reimburses.
• The CRA introduced special rules during the COVID-19 pandemic that allowed eligible employees to claim home office expenses more easily. These rules included a flat-rate deduction of up to $500 without the need for detailed receipts.

How to calculate the amount if you own the house?

To determine the percentage of home office expenses that can be claimed as deductions, you can adopt a practical approach. Calculate the area of your workspace and divide it by the total finished area of your home, including areas like hallways, bathrooms, and kitchens. Another straightforward method is to consider the number of rooms in your house and the number of rooms used for work. Divide the latter by the former to find the percentage. For example, if one out of five rooms is used for work, that's 1/5 or 20% of your home being utilized for work purposes.

When it comes to maintenance costs, it's essential to exercise discretion. If the expenses you incurred, such as cleaning supplies or paint, were for the upkeep of an area in your home not designated as a workspace, you cannot claim any portion of those expenses. However, if the expenses were specifically for the maintenance of your home office, you may be eligible to deduct all or most of them

How to calculate the amount if you rent the house?

If your work area is within a rented residence where you also live, you can deduct a proportion of the rent and any maintenance costs that are relevant to the workspace. The deduction for work-space-in-the-home expenses is subject to a limit, which is the amount of employment income that remains after deducting all other employment-related expenses.

You can only subtract work space expenses from the income related to those expenses, not from any other sources of income. Additionally, work space expenses cannot be used to create or increase a loss from employment. However, if you're unable to deduct all your work space expenses in the current year, you have the option to carry them forward. You can apply these expenses as deductions in the following tax year, provided you are reporting income from the same employer. Carrying forward work space expenses still cannot result in a loss from employment, but it can help reduce the taxes you owe.

When you utilize your work space for both business and personal purposes, you should solely deduct the portion of expenses that pertains to your business activities.

You are eligible to claim only those expenses that you personally incur. If your employer covers or reimburses any of your business-related costs, these amounts cannot be included in your deductions. Furthermore, you cannot use your home business expenses to generate a loss. The Canada Revenue Agency (CRA) stipulates that all your other business expenses, such as those for advertising and legal fees, must be deducted before considering home office expenses.