It’s safe to say that there are more home offices than ever, and more Canadian workers are going to navigate their taxes in a whole new way. Employees are only entitled to deduct home office expenses from their income if they had to:
- maintain a home office where they worked more than 50% of the time; or
- keep a workspace for meeting clients, customers or other people in the course of the employment duties of the employee; and
- pay deductible home office expenses necessary for work and were not reimbursed by their employer.
In anticipation of the onslaught of new home office expense claims, the Canada Revenue Agency (CRA) has come up with special rules for 2020.
The Temporary Flat Rate
The CRA has a temporary flat rate method to simplify expense claims for those working from home due to the COVID-19 pandemic. If an employee worked from home more than 50% of the time for at least four consecutive weeks in 2020, they are entitled to a deduction of $2 per day for each workday up to $400.
Using this temporary flat rate method means you do not need to track expenses, perform workspace calculations, or keep receipts. However, there are a few parameters: only full-time and part-time workdays count for the flat rate; days off, vacation days, sick leave days, and other leaves of absence do not. But employees who were not required to work from home, but chose to do so when provided with the option, are eligible under this filing method.
To receive the full $400, you would need to work 200 days in 2020; if you’re a worker who started their full or part-time job from home when most of the lockdowns began, you would need to have worked from home until the end of 2020 starting on March 16, 2020. Any vacation days, sick days, and other absences during this time cannot be counted as a workday from home.
The flat rate method has not eliminated the usual way of detailing your home office expenses. The detailed method allows eligible employees to claim the employment portion of actual amounts paid. As an employee, you are eligible for this method if:
- you worked from home in 2020 due to COVID-19;
- you were required to pay for expenses related to the workspace in your home;
- your workspace is where you work for at least four consecutive weeks more than 50% of the time, or you only use your workspace to earn employment income and used it regularly and continually for meeting clients or other people for work;
- your expenses are used directly for work; and
- you receive a signed Form T2200 or the new Form T2200S from your employer.
The CRA has a list of common supply and phone expenses, as well as a list of deductible in-home workplace expenses. New for 2020, though, is the allowance of home internet access fee claims. How can you calculate the amount of internet access fees that relate to employment?
How Can You Expense Internet Usage On Your Taxes?
One resource that made almost all work-from-home arrangements necessary was the internet. Because of how quickly most workers made them move to home offices, not every company had time to make arrangements on the internet. This means most home office workers had to pay their bills unaided.
Like other bills, the CRA has a calculator that prorates these costs based on the workspace percentage. If an employee wants to use a different method to calculate the employment-use portion of their home internet access fees, they must meet the following conditions:
- the cost for the plan is reasonable;
- there’s a sound divide between personal and employment use; and
- they can substantiate the amount of data used directly in the performance of employment duties.
The employee should include the employment-use portion of the calculated fees on line 9270 of the T777 or T777S forms under “other expenses.”
When calculating the home internet fees from 2020, they are not included under “Total electricity, heat, water and home internet access fees you paid from”; this total number will be prorated by the workspace-at-home allocation. Like other expenses, employees should ensure they keep the proper documents in support of their claim.