How to claim work-from-home expenses on your taxes
Working from home during the pandemic has given many Canadians more flexibility and a better work-life balance, and it could also help them lower their taxes.
According to the Canada Revenue Agency, you can claim home office expenses if your employer has asked you to work remotely due to the pandemic and you have done so more than 50% of the time for at least four consecutive weeks. If you weren’t told to work from home, but your boss gave you the choice and you did, the CRA will still accept it. However, you can only claim expenses that your employer did not reimburse.
So how do you report home office expenses on your tax return this year? Canadians have two choices: they can either use the itemized method, which allows them to claim their actual expenses, or the temporary flat rate method, a simpler reporting process introduced during the pandemic. CC sat down with Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth Management, to tell him everything you need to know about how to claim work-from-home expenses.
Declaring work-from-home expenses using the detailed method
Get out your calculators and measuring tapes if you’re about to file with the detailed method. This option lets you claim the actual amounts you paid for various home office expenses, like your internet plan and phone plan, but first you need to figure out how big your workspace is and how long you’ll be there. come for professional reasons. and personal use. You’ll also need to have your employer complete a Form T2200S — a statement of your work-from-home arrangements during the pandemic — to claim this way.
The CRA requires you to calculate the percentage of space your office takes up in your home. If your home office is in a designated room, you can count the entire room. If you work at your kitchen table or set up your office in your living room, you only measure the part of the room you use for work. Once you have calculated this percentage, you will need to calculate the time you spend working in the space: for a designated home office it will be 100%, but a workspace in another room will count as a higher percentage weak. , because your working hours are measured against the total number of hours in a week.
As for what you can spend working from home, you can claim a percentage of your rent, electricity, heat, water and home internet based on the space occupied by your home office during the work period. (So, for example, if your home is 1,000 square feet and your office is 200 square feet, you can claim an amount equal to 20% of your related expenses, because H&R Block pointed out.) You can also claim a basic phone plan if the cost is “reasonable” and you can show how many minutes or how much data you used for business purposes. CRA allows employees to claim part of the cost of maintaining their home office space, such as replacing a light bulb or repairing a wall, and certain office supplies such as notebooks, pens and envelopes. You can use the The CRA expense calculator to help you.
Golombek says Canadians might be surprised to learn what doesn’t count as an expense: mortgage payments and interest don’t count, nor do ergonomic chairs, desks, extra screens or a new computer.
Tenants will benefit more from the detailed method since they can claim a portion of their rent on their taxes, Golombek says. “Rent is a big expense, and a pro-rated rent share can be big bucks when it comes to the detailed method.”
But beware: Golombek says you’ll need to keep receipts for every dollar of expenses you claim. “You better have copies, because the CRA might ask you for information,” he says. He talks about his personal experience on this one as he had to go online and download a year’s worth of statements for things like utilities. “I sent the CRA nearly 100 pages of documentation,” he says.
Declaring work-from-home expenses with the temporary lump sum method
If you don’t want to figure out your floor plan, this method is for you. The temporary fixed rate method allows Canadians to claim $2 a day for each day worked from home up to a maximum of $500 for the year, a slight increase from last year’s $400.
It doesn’t hurt to keep a printout of your work schedule with notes on the days you worked from home, but Golombek says that’s a low-risk area. “I can’t imagine you’re going to be audited on this.”
He says the temporary flat rate method is more beneficial to homeowners, given that they cannot claim mortgage costs in the detailed method and prorating their home office space for the hours of the week they use it will not bring them significant expenses to claim. . “Most people’s biggest expense is their mortgage, and the mortgage just isn’t deductible, nor is the interest,” he says. “The $2 a day method is probably the way to go.”
The deadline for filing tax returns is April 30 for most Canadians. The CRA says it will count returns received by May 2 as on time, since the deadline falls on a Saturday.