Important Tax Considerations While Working from Home During the Pandemic
As working from home has become more popular in recent years, many employees have been aware of the unique challenges and opportunities it presents. Now, many of our members find themselves in an unprecedented circumstance: working from home during a pandemic.
We’re facing new personal and professional hurdles, like forming makeshift workspaces and evaluating whether our home internet connection is strong enough to accommodate our current circumstances (like handling multiple Zoom calls). Many have incurred additional costs to be able to work from home effectively. The tax season is now upon us and the Canada Revenue Agency (CRA) has introduced a new option for claiming work-from-home expenses that you should consider.
Before you begin assessing your work-from-home expenses, it’s important to understand the two different methods you can use to claim them on your 2020 income tax return: the temporary flat rate method and the detailed method. While both methods have their advantages, you should consult with your tax specialist to understand which option is best suited to you.
Temporary Flat Rate method
When using the temporary flat rate method, you may be eligible to claim up to $400 in work-from-home expenses. To be eligible for this deduction, you need to have worked from home more than 50 per cent of the time over a period of at least four consecutive weeks in 2020 due to COVID-19. If you meet this requirement, you can claim up to $2 for each day you worked from home, up to a maximum of $400 (this is not a $400 payment from CRA, but rather a $400 deduction on your total taxable income for 2020).
Example: Jill started working from home on March 2, 2020. She worked from home for more than 50 per cent of the time over a period of more than four consecutive weeks; in fact, she accrued 200 work-from-home days (excludes days off, Public Holidays, vacation, sick days and leaves of absence). Using the temporary flat rate method, Jill claimed $2 per day, equaling $400. If she had worked fewer than 200 days, she would have claimed the total number of work-from-home days multiplied by $2. If she had worked more than 200 days, she would have claimed the $400 maximum or considered filing under the detailed method.
If you choose to use the detailed method, you must separate your personal and professional expenses. Also, if you decide to deduct work-space-in-the-home expenses (such as your hydro bill), you must determine the amount of workspace you use in your home. To be eligible to use this deduction method, you need a signed completed copy of the T2200S form or the T2200 form from your employer. This method requires that you keep receipts and supporting documentation of your claimed expenses (you cannot claim any expense that will be reimbursed by your employer). The CRA has now expanded their list of eligible expenses that can be claimed as work-from-home expenses during the pandemic, such as a portion of your utilities or condo fees, and even home internet access fees (some conditions apply).
To learn more details about filing work-from-home expenses, please visit the CRA website at canada.ca/en/revenue-agency(opens in a new tab).