If you have been forced, or have chosen, to work from home due to the COVID-19 pandemic, then CRA’s release of details on the new rules for claiming home office expenses for employees on your 2020 personal taxes may be of interest. (CLICK HERE for details on the CRA website.)
In a “normal” year, if your employment contract requires you to work from home or incur other expenses personally in your capacity as an employee, but you are not reimbursed for them, you may be eligible to deduct these expenses from your income on your personal tax return. You would have to have Form T2200 completed and signed by your employer and keep all relevant receipts and documentation to support the expenses claimed.
However, for 2020 due to the COVID-19 pandemic, new rules have been introduced to simplify the claim for expenses associated with working from home. The new flat rate method is the simplest and does not require any forms from your employer and no documentation is required. This method may be appropriate if you did not incur any additional expenses by working from home. However, if you incurred additional expenses due to working from home, then you may choose to use the detailed method. This will require you to have a completed and signed Form T2200, or the new short version Form T2200S,.from your employer. You will also need to collect and keep documentation to support your claim.
If you are an employer, you may be asked to complete the Form T2200 or T2200S for your employees to enable them to claim home office expenses under the detailed method. If an employee normally works from home or has employment expenses then you will continue to complete the Form T2200 as you would normally. If an employee is only working from home in 2020 due to the pandemic, then the short form T2200S will likely be sufficient for them to be able to claim home office expenses on their personal tax return. CRA will accept an electronic signature on these forms for the 2020 tax year.
Below are brief descriptions of the two methods.
New Temporary Flat Rate Method
There will be a new Temporary Flat Rate method that will simplify your claim. You are eligible for this new method if you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020 due to the COVID-19 pandemic. You can claim $2 for each day you worked from home up to a maximum of 200 working days ($400) per individual.
This method is only available for the 2020 tax year. The benefits of this method is that you do NOT have to calculate the size of your workspace at home and you do NOT need to keep any supporting documents. You are NOT required to have a T2200 or T2200S form completed and signed by your employer to use this method.
New Detailed Method
You are eligible to claim a deduction for home office expenses for the period you worked from home, if you meet all of the following criteria:
- you worked from home in 2020 due to the COVID-19 pandemic or your employer required you to work from home
- you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020
- have a completed and signed Form T2200S or Form T2200 from your employer
- the expenses are used directly in your work during the period
The CRA has made the following changes to the process:
- created a simplified Form T2200S and Form T777S
- created a calculator to help you claim the home office expense deductions that you are entitled to
- will accept electronic signature on the Form T2200S and Form T2200 to reduce the necessity for employees and employers to meet in person (applies to the 2020 tax year only)
The CRA has released a 59 item list of items for individuals to determine specifically what would be deductible and what is not. The eligibility list is broken down by deductibility for commissioned sales persons and employees.
The CRA also has an extensive FAQ available to answer the most common questions tax payers may have.