Canada Revenue Agency (CRA) has temporarily updated and simplified the eligibility requirements for deducting home office expenses for employees working from home due to COVID-19 in 2020.
These changes benefit many employees, as they are much less restrictive than CRA’s deductibility requirements that apply outside this temporary circumstance.
Temporary Flat Rate Method for Deducting Home Office Expenses
CRA has listed the following conditions that must be satisfied to claim a deduction for home office expenses paid:
- You must have worked from home in 2020 due to the COVID-19 pandemic (either by choice, or because your employer required you to work from home);
- You worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020;
- You are not claiming employment expenses other than home office expenses; and
- Your employer did not reimburse you for all of your home office expenses (if you received a partial reimbursement, you are not excluded).
According to CRA, a day where an employee worked either full-time or part-time hours will count as a work day, but days off, vacation days, sick leave days, or other leaves or absences do not qualify.
CRA has also indicated that multiple employees working in the same home can qualify, as long as each employee meets the above criteria.
Unlike under the detailed method for calculating home office expenses, employees do not need to determine the size of their work space, or track expenses to calculate their claim. Instead, the amount of the claim is a temporary flat rate of $2 for each day an employee worked from home in 2020 due to the COVID-19 pandemic, but no more than a maximum of $400 for home office expenses.
CRA currently states that the temporary flat rate method will only be available for the 2020 tax year.
Employees hoping to claim a deduction for work at home on their 2020 tax returns should be aware that CRA has temporarily relaxed its requirements for doing so. We expect that CRA will clarify whether the new temporary deduction will apply in any tax years other than 2020.
The new temporary flat rate method contrasts with the ordinary home office expense deduction rules, which require that office space in the home be used for the employee’s work more than half the time, or be regularly and continuously used only for meeting clients, customers, or others in the course of employment duties, and require the employee’s employer to prepare and sign a T2200 Declaration of Conditions of Employment to certify what types of expenses must be incurred as a condition of employment.
However, we note that CRA has also improved the ordinary home office expense deduction rules to account for the impact of COVID-19. This includes temporarily allowing employers to complete a simpler form, the Form T2200S, for use in respect of employees using the detailed method to calculate home office expenses. CRA has also expanded the list of expenses eligible under the detailed method to include home internet expenses.
This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.