Who qualifies for a tax break?
According to Statistics Canada, 3.3 million extra Canadians worked from home in April. While some returned to the office by the summer, there were still around 4 million people working remotely in July — a huge jump from the typical 1.6 million.
The CRA will allow some of those employees to claim what’s called the workspace-in-the-home deduction. Those who qualify can deduct part of the costs of their workspace, like rent, electricity, heating, maintenance and home insurance.
To be eligible, you either need to work from home more than 50% of the time or use your home office exclusively for work and regularly meet clients there. Seems simple enough, but Canadians may need some clarification on the rules this year.
Those working from home since March seem to fit the eligibility criteria, but if the agency looks at cases from an annual perspective — as it normally does — people forced to work from home for less than six months would miss out.
How do I apply for a tax break?
Typically, the CRA requires employees who are claiming this deduction to get their employer to fill out the T2200 form, which certifies that working from home is a condition of your employment. (Self-employed people, just know your usual process hasn't changed.)
In September, the CRA consulted with the Canadian Chamber of Commerce to review whether the rules should be adjusted, taking into consideration the impact of the pandemic.
As of today, employees still need their employer to fill out the form. But with millions of employees working from home in 2020, the paperwork could be unimaginable for both employers and for the CRA.
Though the rules haven’t changed yet, Conservative revenue critic Marty Morantz has called on the government to clarify its plans and give more Canadians a tax break.
In the meantime, hold on to your receipts.
What expenses can I deduct?
You might have set up a beautiful home office — complete with ergonomically correct accessories — but that doesn’t mean it’s all coming off your income taxes.
Here’s what you can and can’t claim on your taxes:
To claim a portion of your housing expenses, your employer must require the use of a home office as part of your employment contract, sign the T2200 form and can’t reimburse you for those expenses.
If you meet all of those requirements, you can claim a portion of your home’s operating expenses including heat, electricity, water, maintenance (like cleaning supplies and light bulbs), condo fees and even rent.
To figure out how much you can claim, you need to determine how much of your home is taken up by your office.
For example, if your home is 1,000 square feet, and your home office takes up 200 square feet, you’ll be able to claim 20% of your total housing expenses.
Phone: Yes, you can deduct a portion of your cellphone plan with a T2200 under certain conditions. The plan itself needs to be reasonable, and you need to prove you used the amount you claimed for work.
Internet: Yes, but the rules are equally strict. You can only claim the portion you used exclusively for work. The CRA won’t cover your YouTube fix.
Consumable supplies: Yes, you can deduct the total cost of these items as long as you used them solely for work. That includes pens, paper, stamps and ink cartridges.
Furniture and tech: No, items like chairs, desks and monitors are permanent and thus considered capital expenses, which can’t be deducted by employees.
Mortgage payments, property taxes and insurance: No, your mortgage payment is not considered an expense. But employees who work on commission can claim property taxes and insurance.
Clothing: No, even if your job requires special clothing, you can’t deduct the costs.
Don’t waste the savings
So if you’ve been working from home since March, you’re likely eligible for a nice tax break. Just be mindful what you do with it.
As the coronavirus continues to flare up in areas across the country, further containment measures could spell trouble for your finances.
If you do get a refund in a few months, consider using it to top up a high-interest savings account. You’ll have easy access in an emergency, and your money will grow way faster than it would in a traditional savings account.