Working from Home? Simple or Detail?

We all have to agree that COVID-19 has thrown a curve into our lives, and well claiming working from home expenses on your 2020 Canadian Personal Income tax return is no different.

Canada Revenue Agency (CRA) has always allowed you to claim employment expenses relating to working from home on the condition that your present or past related employer agreed to this through their declaration (Form T2200 – Declaration of Employment Conditions).

Starting in the 2020 Canadian Personal Tax year, CRA has added a simplified method for claiming working at-home expenses. However, before you go with the very minimal $2.00 for each day expense deduction, let's give you the pros and cons of each.

To claim the simplified method (we will call it the $2 method), you need to make sure that you worked either full-time or part-time (making up 50% of the total employment time) for at least a four consecutive week period in 2020. But don't worry, as if you do not qualify (based on the above), you may still be eligible for the detailed method.

If you meet the $2 method criteria (above), then you are eligible to claim $2.00 per part-time or full-time day worked. If that does not sound like much of an allowable claim – well, in our opinion, you are right! Let's take a look at someone living in greater Vancouver who worked in a space that took up 10% of the total home space for employment purposes:

• Annual Rent Payments (2020 average): $19,800
• Annual Electricity Payments: $480
• Annual Heating Payments: $330
• Annual Internet Payments: $960
• Annual Home Maintenance: $420

• Total Average Household Expenses: $21,990
• 10% Allowable portion: $2,199

Now, suppose you compare the above to the maximum simplified method of $2.00 x 252 = $504. In that case, you can see that the detailed method gives you an extra $1,695 in allowable employment claim, which would put an additional $508.50 in refunds (assuming you are at the 30% combined tax rate).

In a nutshell, you would receive a refund boost of $659.70 (using the detailed method) verse a relatively small $151.20 using the $2 Method. It will most likely be less than 252 days; assume you worked 100% of the time from home for the whole year of 2020.

We are sure that most of the readers of this article are our clients or have heard about us and understand the benefits of using a professional accountant in the preparation of your Personal Income Tax returns. The above is another example of why having our firm prepare your income taxes will ensure that you get the highest refund (or tax reduction) through our 35 years of Personal Income Tax experience.

What can you do to get your home expenses for us when we prepare your personal income tax returns?

Determine the start date and end date you worked from home, then count the total number of workdays (using a calendar makes this easy). We will need this number of eligible work from home days.

Next, gather the receipts and add up the annual amounts for:

• electricity
•  heat
•  water
•  utilities portion (electricity, heat, and water) of your condominium fees¹
•  home internet access fees²
•  maintenance and minor repair costs³
•  rent paid for a house or apartment where you live but not mortgage interest.⁴

If you have commission income on your T4 (usually noted as box 42), you should also gather the receipts and add the annual amounts for: 

•  home insurance
•  property taxes
•  lease of a cell phone, computer, laptop, tablet, fax machine, etc. that reasonably relate to earning commission income

You may also be eligible to claim the GST/HST you paid on your employment expenses if your employer is registered with CRA GST/HST. This benefits is not a deduction but instead a dollar for dollar amount based on the eligible portion of the GST/HST paid for employment expenses.

You will notice that there are four footnotes referenced above. Click the button for each footnote: