We have just said goodbye to 2020, an especially difficult year for many, and have entered a new year. Governments across the world, including Canada, have begun implementing mass-vaccination programs to try to eradicate the COVID-19 pandemic. Subsequently, a return to the office could become a reality sometime in 2021. However, we are not there yet.
In the meantime, many employers required their employees to work from home in 2020, in order to safeguard employees against the virus. In response, the Canada Revenue Agency (CRA) introduced a new temporary flat rate method to simplify claiming the deduction for home office expenses for the 2020 taxation year. If you mostly worked from home during the 2020 year, you may be eligible to claim a deduction for home office expenses through either the temporary flat rate method (which likely will only be valid for one or two taxation years) or the detailed method.
Who Qualifies To Claim This Deduction for Home Office Expenses Under the Temporary Flat Rate Method?
The CRA has set out eligibility criteria for being able to claim the home office expense under the temporary method for 2020. An employee who aims to be eligible must meet all of the following criteria:
- The employee worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020;
- The employee worked from home in 2020 due to the COVID-19 pandemic or the employer required them to work from home;
- Expenses were used directly in the employee’s work during the period;
- The employee is only claiming home office expenses and not any other employment expenses (for claiming more expenses through the detailed method, see below); and
- Only if the detailed method was used to complete the claim, then the employee must have a completed and signed Form T2200S or Form T2200 from the employer. If an employee is strictly using the temporary flat rate method, then the employer does not need to complete and sign Form T2200S or Form T2200.
What is the New Temporary Flat Rate Method?
This method is a simpler way to calculate your work from home expenses. Basically, employees can claim $2 for each day they worked from home, during the period they were required to work from home. They can also claim additional days they worked from home. However, this new temporary flat rate method does have a limit. An employee cannot claim more than $400 for the 2020 taxation year.
How Are the Work Days Counted?
The good thing about the simplified process is that employees do not have to provide supporting documents or calculate the size of their workspace. However, employees do need to be aware of what days can and what days cannot be counted.
Days that can be counted include the days an employee worked part-time hours from home and the days an employee worked full-time hours at home. The days that cannot be counted include:
- Sick leave days;
- Days the employee took off;
- Days the employee was on vacation; and
- Any other leaves or absences.
Temporary Method or Detailed Method?
The temporary method is a flat rate method and you can only claim up to $400, which is 200 days, in expenses. However, if you had a lot more expenses in setting up your office, you can use the detailed method. This method applies not only to eligible employees working from home in 2020 due to the pandemic, but also to eligible employees required to work from home, period.
However, with the detailed method, employees are required to provide documentation for the actual amounts they paid for their home office expenses. In addition, as has already been mentioned, the employees must receive a completed and signed Form T2200S / Form T2200 from the employer.
Which Expenses Can Be Claimed Under the Detailed Method?
There are two types of employees under this method; salaried employees and commission employees. Salaried and commission employees can claim (based on the size of their home workspace) a percentage of the following expenses:
- Home Internet fees;
- Water, heat and electricity;
- The utility portion of the condominium fees, which include heat, water, and electricity;
- Rent paid for a house or apartment where the employee lives; and
- Maintenance and minor repair costs.
In addition, only commission employees can claim property taxes, home insurance and leases. Such leases include:
- Laptop lease;
- Cell phone lease;
- Computer lease;
- Tablet lease;
- Fax machine; and
- Any other lease that reasonably relates to earning commission income.
However, there are expenses that cannot be claimed by either salaried employees nor commission employees. These expenses include:
- Home Internet Connection Fees;
- Mortgage interest;
- Principal mortgage payments;
- Capital expenses (replacing windows, flooring, furnace, etc);
- Wall decorations.
It is important to remember that the temporary flat rate is just that, temporary. This method will likely only apply to the 2020 taxation year, and possibly the 2021 taxation year. Home office expense claims will likely go back to the detailed method once the pandemic is no longer an issue.
For advice on these and other employment or labour law matters, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins LLP. We regularly advise workplace parties on a wide range of legal workplace issues. Contact us online or by phone at 416-364-9599 to schedule a consultation.
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