Working from home during the pandemic has given many Canadians more flexibility and work-life balance—and it might also help them lower their taxes.
According to the Canada Revenue Agency, you can claim home office expenses if you were required by your employer to work remotely due to the pandemic, and did so more than 50 per cent of the time for at least four weeks in a row. If you weren’t told to work from home but your boss gave you the choice and you took it, the CRA will still accept that. But, you can only claim expenses that your employer didn’t reimburse.
So how do you claim home office expenses on your tax filing this year? Canadians have two choices: they can either use the detailed method, which allows them to claim their actual expenses, or the temporary flat rate method, a simpler filing process introduced during the pandemic. CB spoke to Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth Management, to explain everything you need to know about how to claim work-from-home expenses.
Claiming work-from-home expenses with the detailed method
Get out your calculators and measuring tapes if you’re preparing to file with the detailed method. This option allows you to claim for the actual amounts you paid on various home office expenses, like your internet and phone plan, but you need to first determine the size of your work space and the amount of time you spend in it for professional and personal use. You’ll also need to ask your employer to fill out a T2200S form—a declaration of your working-from-home employment conditions during the pandemic—to claim this way.
The CRA requires that you calculate the percentage of space your office occupies in your home. If your home office is in a designated room, you can count the entirety of the room. If you work at your kitchen table, or set up your desk in your living room, you measure only the portion of the room you use for work. Once you’ve worked out that percentage, you’ll need to calculate the amount of time you spend working in the space: For a designated home office it will be 100 per cent, but a workspace in another room will count for a smaller percentage, because your working hours are measured against the total hours in a week.
When it comes to what you can expense working from home, you can claim a percentage of your rent, electricity, heat, water and home internet based on the amount of space your home office takes up for the period of time you worked. (So for example, if your home is 1,000 square feet and your office is 200 square feet, you can claim an amount equal to 20 per cent of your related expenses, as H&R Block points out.) You can also claim a basic phone plan if the cost is “reasonable” and if you can show how many minutes or how much data you used for work purposes. The CRA allows employees to claim a portion of maintenance costs to their home office space, such as replacing a lightbulb or repairing a wall, and some office supplies like notebooks, pens and envelopes. You can use the CRA’s expense calculator to help you.
Golombek says Canadians may be surprised to learn what’s not considered an expense: mortgage and interest payments don’t count, nor do ergonomic chairs, desks, extra monitors or a new computer.
Renters stand to benefit more from the detailed method since they can claim a portion of their rent on their taxes, Golombek says. “Rent is a big expense and a pro-rated share of rent can add up to big dollars when it comes to the detailed method.”
But be warned: Golombek says you’ll need to keep receipts for every dollar of expenses you claim. “You better have copies, because the CRA could ask you for information,” he says. He’s speaking from personal experience on this one as he had to go online and download a year’s worth of statements for things like utilities. “I sent the CRA almost 100 pages of documentation,” he says.
Claiming work-from-home expenses with the temporary flat rate method
If you don’t want to figure out your floor plan, this method is for you. The temporary flat rate method allows Canadians to claim $2 per day for every day they worked from home up to a maximum of $500 for the year, a slight increase from last year’s $400.
It doesn’t hurt to keep a printout of your work calendar with notes on the days you worked from home, but Golombek says this is a low-risk area. “I can’t imagine you’re going to get audited on that.”
He says the temporary flat rate method is more advantageous for homeowners, given they can’t claim mortgage costs in the detailed method and pro-rating their home office space for the hours of week they use it won’t net them meaningful expenses to claim. “Most people’s biggest expense is their mortgage, and the mortgage is simply not deductible, nor is the interest,” he says. “The $2 a day method is probably the way to go.”
The income tax filing deadline is April 30 for most Canadians. The CRA says it will count returns received by May 2 as on-time, given the deadline falls on a Saturday.