As many Canadians continued to work from home in 2021 due to COVID-19 pandemic restrictions, this year’s tax season might be more complicated than usual. In some provinces, public health guidelines mandated all employees set up offices in their homes, and in others, the company you worked for determined who could do so.
To compensate for the home office expenses they incurred, the Canada Revenue Agency (CRA) announced a new temporary flat rate method for the 2020 tax year, but some things have changed for 2021. It’s important to know what you can and cannot claim if you worked from home last year. Here are some guidelines for turning your pandemic work-from-home experience into a tax deduction on this year’s tax return.
What’s changed for 2022?
The “simplified method” was introduced in 2021, allowing individuals who worked more than 50% at home for at least four consecutive weeks of 2020 to claim up to $400—or $2 per day up to 200 days within the period—in home office expenses. With the simplified method, employers do not have to sign any forms, and as an employee, you don’t have to calculate the size of your workspace or provide any supporting documents.
This year, you can claim up to $500 in home office expenses under the CRA’s simplified $2 per day flat-rate calculation method, for 250 days—up from 200 days.You cannot claim any other type of work expenses, such as use of your car. You don’t have to list your expenses or submit any extra forms with your tax return.
Claiming your Canada Emergency Response Benefit (CERB) falls into a different category, so be sure to claim this properly on your taxes.
Think your workspace expenses are higher than the $500 maximum amount allowed under the simplified method? You may also choose to claim your home office expenses using the government’s detailed calculation method. This involves filling out a simplified Form T2200, which needs to be signed by your employer, and a simplified Form T777: Statement of Employment Expenses (Form T777S).
The CRA also expanded the list of eligible expenses this year, which now includes home internet access fees—but not the connection fee or modem/router rental. If you’re looking to claim office supplies as part of the detailed method, you can only claim the portion you use for work. For office supplies, the CRA only allows items that are consumed while directly performing your job. For example, you can claim printer ink and printer paper but you cannot claim the purchase of the printer itself. Be sure to check the CRA’s website for a comprehensive list of what you are able to claim.
Note: eligible expenses will differ based on if you are a salaried or commissioned employee.
What if you are self-employed and working from home?
You can deduct expenses related to operating as a self-employed worker in your home as long as it’s your principal place of business and you use that dedicated space on an ongoing basis only to earn business income.
The CRA allows you to deduct part of your home maintenance costs such as heating, home insurance, electricity, and cleaning materials, plus part of your property taxes, mortgage interest, and capital cost allowance. Generally, you calculate how much to deduct by dividing the size of your workspace by the total square footage of your home. You cannot deduct an amount in expenses higher than your net business income.
Because government rules change from time to time, make sure you consult an experienced tax professional if you have questions about your tax situation this year.
Source: realtor.ca
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