Are home office expenses tax-deductible for employees working from home due to COVID-19?

The Federal Government has provided additional guidance with respect to employees deducting home office expenses for the 2020 tax year due to the COVID-19 pandemic. If an employee meets the eligibility criteria, there are now two options to calculate the deduction:

  • A temporary flat rate method, or
  • The detailed method involves using the simplified form, T2200S, Declaration of Conditions of Employment for Working at Home During COVID-19

Eligibility

An individual is eligible to claim a deduction for home office expenses for the period worked from home IF the following criteria are met:
The employer required the individual to work from home or the individual chose to work from home due to the COVID-19 pandemic.
The individual worked more than 50 percent of the time from home for a period of at least four consecutive weeks in 2020 due to COVID-19.

Option 1 : Temporary Flat Rate Method

The new temporary flat rate method simplifies an employee’s claim for home office expenses. Eligible individuals may claim $2 for each day worked (either full-time or part-time hours) from home in 2020 due to the COVID-19 pandemic. The maximum claim using this new method is $400 (200 working days x $2) per individual.

There is no calculation of workspace size, no requirement to keep documents to support the claim, and no requirement for a completed Form T2200, Declaration of Conditions of Employment, signed by an employer. Where multiple employees are working in the same home, each employee working from home who meets the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses.

Option 2 : Detailed Method

Employees with larger claims for home office expenses may instead choose to use the detailed method to calculate their home office expenses deduction in 2020. For these individuals, the Canada Revenue Agency (CRA) has created a simplified Form T2200S, a shorter version of Form T2200 that must be completed and signed by the individual’s employer. For the 2020 tax year only, the CRA will accept an electronic signature on these forms.

Employees using the detailed method will need to determine the size and use (employment and personal) of their workspace. For assistance with claiming the home office expense deduction, the CRA has created an online calculator taxpayer can access. The CRA has also expanded the list of eligible expenses that can be claimed to include home internet access fees, creating a comprehensive list for claimants. Employees must retain documents supporting the claim under this option.
The CRA has also created a simplified Form T777S, Statement of Employment Expenses for Working at Home Due to COVID-19, to be used by employees to submit their claim under either option.


JANUARY 18, 2021 BY  STILLCPA