These days, many companies allow their employees to work from a remote location (e.g., from home), either full time or on a hybrid basis. While such working arrangements have existed for years, they became the standard once the COVID-19 pandemic began. This growing trend toward flexibility helps people to juggle work and personal responsibilities as they seek greater balance in their lives.
While fewer days commuting to the workplace saves both time and hassle, it’s also a financial benefit in the form of reduced gas and parking expenses (plus less wear and tear on your vehicle), or fewer paid trips on public transit. Taking advantage of income tax breaks is another way to keep more of your hard-earned money in your pocket.
Starting in the 2020 tax year and extending at least through the 2022 tax year, the Canada Revenue Agency (CRA) has permitted employees to make certain deductions related to home-office expenses that may result in a lower income tax liability. If you haven’t done so already, it’s time to put those deductions to good use while they’re still available to you.
How the tax deduction works
You may qualify for the deduction if working from home was required by your employer as a result of the pandemic, and you worked from home for at least 50% of the time over a minimum period of four consecutive weeks in either 2020, 2021 or 2022. You must choose between two methods to calculate your tax deduction: temporary flat rate or detailed.
Temporary flat-rate method
This is the simpler method as you can make a claim without having to submit a form signed by your employer. You may claim $2 for each day of remote work, up to a maximum of $400 (i.e., 200 business days) for 2020, or a maximum of $500 (250 business days) for each of 2021 and 2022. Be sure not to claim any employment expenses on Line 22900 of your income tax return and ensure that your employer does not reimburse you for home-office expenses.
Claim your deduction by submitting a completed Form T777S with your income tax return. There’s no need to provide supporting documents, such as receipts for home-office expenses. If your spouse also meets the eligibility criteria, you may both claim the deduction, up to the limit that applies to each of your work-from-home situations.
Use this method if you’ve incurred home-office expenses that are higher than the amount covered by the temporary flat-rate method. Qualifying expenses include (but aren’t limited to) a portion of your rent or condo fees, internet access fees, minor maintenance and repairs, and utility costs for heat, electricity and water. To calculate your claim, divide the square footage of your workspace by your home’s overall square footage. For example, if your workspace is 10% of the home’s square footage, you may deduct 10% of eligible expenses.
Support your claim with Form T777 or T777S, as well as Form T2200 or T2200S (signed by your employer to declare your conditions of employment and to confirm they did not reimburse you for associated expenses). If your spouse also qualifies for the detailed method, they may also claim expenses, but you cannot both make the same expense claim. Be sure to keep relevant receipts, supporting documents and other related records, in case the CRA needs to review them. Find out how we can build a personalized plan designed to grow long-term wealth in a tax-efficient manner. Contact us today
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