Employee home office expenses during COVID-19
The COVID-19 pandemic has resulted in many employees working from home. As a result, working-from-home tax deductions on their 2020 personal income tax returns has become a hot topic.
On December 15, 2020, the CRA released information on a number of employment-related issues, including home office expenses and Form T2200.
Highlights of the CRA release on home office tax deductions
- Employees will be able to claim a home office tax deduction if they worked from home in 2020 due to the COVID-19 pandemic and in particular, more than 50 percent of the time from home for a period of at least four consecutive weeks in 2020.
- Where the employee qualifies, they can use a detailed calculation, or they can use the new temporary flat rate method. If they use the flat rate method, then no T2200 is needed.
However, if they use a detailed calculation, they will have to obtain a regular T2200 form or a shortened pandemic version of the form (Form T2200S) from their employer.
- Under the flat rate method, the individual can claim $2 per day for each day worked at home up
to a maximum of $400 (i.e. 200 days).
- The CRA has also announced that internet access costs are eligible to be considered home office expenses, but only if the detailed calculation approach is used. It appears that the CRA expects this cost to be prorated on the same basis as utilities such as electricity and heat.
- The T2200S is much shorter than the simplified version that the CRA had previously circulated.
Claiming home office expenses during the pandemic
An employer will only have to confirm whether the individual worked at home due to the pandemic, whether they were reimbursed for home office costs and whether those costs are reported on the employee’s T4.
Employees will have to carefully consider which option is best under their particular circumstances. For example, renters can generally claim a higher amount than homeowners under the existing rules (detailed method). Other employees, such as those who worked at home for more than 200 days, will be better off using the detailed calculation.
For more information on what home office deductions are available to you please contact our experienced tax accountants.