COVID-19 and Working From Home
JANUARY 28, 2021
With the impact of COVID-19 on employees and their need to work from home during 2020, CRA has offered some guidance on claiming home office expenditures.
There are two methods that can be used to claim expenses related to working from home:
- Temporary Flat Rate Method (new for 2020)
Detailed Method (expanded for 2020)
Temporary Flat Rate Method
- You worked from home due to COVID-19,
- You must have worked at least 50% of the time from home for at least four consecutive weeks in 2020,
- You are only claiming home office expenses and are not claiming other employment expenses, and
- Your employer did not pay for all your working from home expenses.
Employer certification: not required.
Receipts for expenses: not required.
Determination of your work space use: not required.
Eligible expenses: you are not required to track specific expenses. Instead, you are entitled to claim $2 per day you worked at home, to a maximum of $400.
If your employer reimbursed any amount of your home office expenses, that amount will be deducted from your claim.
While this method is the simplest to calculate and requires little to no supporting documentation, it may not be the most beneficial. If you believe your actual home office expenses for the period that you worked from home exceeded $400, claiming home office expenses under the detailed method should be considered.
If you are eligible and would like to make this claim please provide:
- dates that you worked from home
- the amount of any reimbursements your employer made to you for working from home expenses
- You worked from home due to COVID-19 or your employer required you to work from home,
- You must have worked at least 50% of the time from home for at least four consecutive weeks in 2020 or you used your workspace to earn employment income and used it regularly and continually to meet with clients, customers or others while doing your work,
- You were required to pay for expenses related to your workspace in your home,
- Your expenses were used directly in your work, and
- You have a completed and signed copy of a Declaration of Conditions of Employment form (T2200S or T2200).
Employer certification: required – form T2200S is a simplified form to be completed if working from home due to COVID-19 or T2200 if required to work from home by your employer.
Receipts for expenses: required, but do not need to be submitted with tax return.
Determination of your workspace use: percentage of your home that was used as a workspace. For common or shared areas, the hours used for work must also be considered.
Eligible expenses: office expenses used for work (your phone, internet, office supplies), as well as a portion of your home expenses (electricity, heat, water, maintenance and repairs, condo fees specifically related to utilities, and rent). If you earn your wage through commissions, a portion of home insurance and property taxes can also be claimed.
Any reimbursements your employer made to you related to working from home expenses will need to be deducted from the claim you are making.
See the example below to help determine your workspace use.
If you are eligible and would like to make this claim please provide:
- dates that you worked from home.
- square footage of living space in your home (i.e. include finished basement), and the square footage area of your work space.
- the time you spent working in that area (if the area was not used exclusively for work).
- total spent on office supplies used for work (printer paper, pens, sticky notes, etc.), internet and telephone costs for the period of time you worked from home.
- total spent on utilities, maintenance or repairs, rent, and condo fees specifically related to utilities for the period of time you worked from home.
- Note that mortgage payments, mortgage interest, property taxes and insurance are not claimable.
- the amount of any reimbursements your employer made to you for working from home expenses.
- a copy of your signed T2200S or T2200.
For the purposes of tax return preparation, totals of the above or spreadsheets detailing amounts is acceptable. However, you may be asked by CRA to provide receipts, so please do not throw any of these away, and only include an expense in your total if you are able to access a receipt for it.
An Example of the Detailed Method
John worked from home Tuesday – Fridays during COVID-19 from April 1, 2020 until the end of the year, coming into the office on Mondays to meet with colleagues and gather assignments for the week. John works 8 hours per business day, with no overtime. His employer filled out a T2200S for him, meaning he is eligible to deduct only working from home expenses from his employment income. He works from home in his home office, which takes up 300 sq. ft. of his 2,000 sq. ft. home and is used exclusively for work. He spent the following amounts between April 1, 2020 and December 31, 2020:
- Electricity and gas (heat): $1,170
- Water: $420
- Alarm system monitoring (for the entire year, paid in January 2020): $400
- Internet: $1,080 (John estimates 25% employment use based on reasonable factors)
- Cell phone: $810 (John estimates 25% employment use based on reasonable factors)
- Repainting office (occurred in May 2020): $300
- Replacing all existing flooring in his house with similar flooring (occurred in August 2020): $5,000
- Office consumables (printer paper, pens, ink, etc. that are used exclusively for work): $110
Note: Remember that items like USB keys, headsets, webcams (anything not “used up” in the course of work) are considered capital items and are not deductible from employment income.
Because John worked from home at least 50% of the time (4 out of 5 business days per week) for the final 39 weeks of the year, he is eligible to deduct working from home expenses for 39 out of 52 weeks in the year. For any expenses paid annually, they would have to be prorated to 75%: 39 / 52 = 75%
Note: If you meet the threshold requirements for the detailed method (working from home 50% of the time or more for a period of 4 consecutive weeks or more) CRA is allowing you to claim relevant home office expenses for the period you were working from home
John’s alarm expense was paid in January 2020 for monitoring throughout the entire year, and therefore needs to be prorated for the periods that he was eligible to claim working from home expenses (calculated in step 1). To do this, multiply by the 75% calculated in step 1: Alarm system monitoring $400 x 75% = $300
John’s home office accounts for 15% of his house (300 / 2,000 = 15%). Therefore, John can claim 15% of expenses related to his entire house for the period he is eligible. This includes the $300 from step 2, as well as utilities paid for April 1 – December 31, 2020, and the $5,000 in replacement flooring, because the repair occurred during his eligibility period of April 1 – December 31, 2020: (Step 2 $300 + electricity and gas $1,170 + water $420 + Maintenance $5,000) x 15% = $1,033.50.
Note: If the flooring replacement had occurred outside of when he was eligible (in February 2020, for example), it would not be allowed to be included in the calculation above. Additionally, note that he did not add additional flooring, or improve the type of flooring, it was a replacement with similar flooring. If the flooring was improved (replacing linoleum with tile), then the expense is capital in nature and not deductible.
Note: Because John uses his space exclusively for employment, he does not have to prorate the expenses for the amount of time that he occupies the space for employment.
Expenses such as John’s internet and cell phone need to be prorated for personal use. John estimates that 25% of his overall use of his internet and cell phone are for employment purposes. Therefore, John can claim $202.50 for his cell phone: $810 x 25% = $202.50
The repainting of his office (his chair was rubbing against the wall and wearing out the paint, plus his wife hated the colour, it was a whole ordeal) occurred only in his home office, and therefore John is eligible to claim the entire $300. Additionally, the office consumables he purchased were entirely used for work within the eligibility period, and they too are 100% deductible, with no need for proration.
Note: Similar to the flooring replacement, if the repainting of the office had occurred outside of April 1, 2020 – December 31, 2020, it would not be eligible to be claimed.
Finally, we add the calculated parts together to determine John’s working from home deduction for 2020: step 3 $1,033.50 + step 4 $202.50 + office repainting $300 + office consumables $110 = $1,646
John’s eligible working from home expense claim given by the detailed method is $1,646!
Questions? Let us help!
These calculations can be daunting for many people, and an audit by CRA can be a stressful process, so please feel free to reach out at (204) 942-0861 any time and ask a question or two. Fort Group is open 9:00 a.m. to 5:00 p.m. every business day, and we are eager to help anyone that asks!
You can also access the CRA online calculator here to help you with your calculations.
To satisfy the lawyers:
The above article is provided for general information and educational purposes only, and in no way is intended to be relied upon or provide personal or corporate taxation advice. The article does not take into account the individual needs of the reader and may not provide advice suitable for said reader. No information contained within this article should be construed or interpreted as being directly relevant to the personal or corporate taxation situation of the reader. In any accounting, taxation, or financial matter thereby related, you should always consult a chartered professional accountant before filing any tax returns, financial statements, or related financial documents with any authorities. Any information contained within this article, including but not limited to, tax rates, filing deadlines, and eligible revenue and expenses are subject to change without notice, and Fort Group Chartered Professional Accountants is not responsible for updating this information.