Who qualifies for a tax break?
Even if you occasionally went to your workplace, you still might be able to claim expenses.
To be eligible, the CRA says you need to have spent at least 50% of your hours working remotely during four consecutive weeks in 2020. That includes full-time and part-time hours.
Those who qualify can deduct a flat rate, or part of the costs of their workspace, like rent, electricity, heating and maintenance.
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. Now, a new form can make claiming expenses easier: The T777S.
Here are the two ways you can claim expenses:
The temporary flat rate method
Using the T777S, you can make a claim without a signed form from your employer or even receipts from your expenses.
You can claim $2 for each day you worked remotely, up to a maximum of $400 — 200 working days — per individual. Sharing your home office with someone else? You can both make the maximum claim.
The detailed method
If you've racked up some serious office expenses, you might be able to write off more than what's being offered through the T777s. In that case, you can still opt to submit a claim like you normally would, with an employer-signed T2200S form (a shorter version of the T2200).
Then 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.
That doesn't include expenses like home office furniture and computer equipment. However, you'll still get a tax break if your employer has offered to pay those bills for you.
The CRA is allowing employers to reimburse employees for up to $500 worth of expenses tax-free. Employees will need to check with their human resources department to verify that their company is participating — and keep their receipts.
What expenses can I deduct with a T2200S form?
You might have set up a beautiful home office — complete with ergonomic 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:
Phone: Yes, you can deduct a portion of your cellphone plan with a T2200S 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.
If in doubt, the CRA now has a handy calculator to help you add up your claimable expenses based on the filing method you choose.
Don’t waste the savings
So if you’ve worked from home for at least part of 2020, you’re likely eligible for a nice tax break. Just be mindful what you do with it.
Even with the rollout of a vaccine, it could be some time before the pandemic is under control, and further containment measures could mean further strain on your finances.
If you do get a refund, 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.
Until then, try to avoid the common mistakes people make in a recession.