Working from Home Deduction for Employees

During 2020, many employees worked from home for the first time in their working careers. Some employees did so for several weeks and others for several months and are still working from home.

CRA Canada Revenue Agency fortunately realized there needs to be an option to easily claim some employment expenses on your tax return.

We have always had the ability to claim working from home expenses if it was a requirement for the job. First your employer needed to provide a form T2200, Conditions of Employment. For the deduction you claimed you needed to keep track of all expenses and keep all receipts as proof in case CRA requested as part of their review.

With so many employees working from home, it would be unreasonable to have every employer complete a form T2200 for every employee that worked from home at least part of the year.

CRA introduced two new options to the “regular” way to claim employment expenses. These options are only for those who worked from home due to COVID-19 in 2020; either required by your employer or you chose to.

The easiest way to claim working from home expenses is the new temporary flat rate method. If you worked from home more than 50% of the time for at least four weeks since March 15, you can claim the flat rate method. You can claim $2 per day for each day you worked from home. You cannot claim for days that you did not work because of vacation or sick days or stat holidays. The maximum you can claim is 200 days since March 15 or $400.

There is a good Working Days Calculator at this website to calculate your number of days: https://www.timeanddate.com/date/workdays.html

Remember to subtract any vacation days and any sick days or any other days you were not working at home; watch for days the calculator may not take into account: Remembrance Day, Christmas Day, Boxing Day seems to be missing from this calculator.

Keep in mind, the $2 per day is a deduction. If you are in the lowest tax rate, your savings are $25 for every $100 deducted. If you are in the highest tax bracket, your tax savings may be $50 for every $100 deducted. The tax savings are modest.

Should you use the new Temporary Flat Rate Method?

We have done some calculations to see what method may be better or at least easier.

If you worked from home but it was a shared workspace (you worked in your kitchen, dining room, or living room), we recommend you use the flat rate method. Because you only used the space for a limited time (maybe 40 hours out of 168 total hours per week), the percentage of your expenses becomes quite low.

When you calculate your square footage (say 12% of your home) and the percentage of hours (40/168 or 24%), it becomes a low number: 2.85% of your operating home expenses, for example. This example equates to $2 per day if the operating expenses are $1400/month.

If you worked less than full time, the Flat Rate Method is likely the best for you because of the prorated hours.

The Simplified Method

The second option is to claim the expense details using form T2200S and T777S. To use this method, you still needed to work from home at least 50% of the time for a period of at least four consecutive weeks since March 15.

If you have a dedicated room like a bedroom, you can claim your home expenses based on a percentage of the square footage of the home and if the space was not used for personal purposes, you do not need to prorate by the hours worked.

Keep in mind there are limited operating expenses you can claim a percentage of: electricity, heat, water, internet access fees, basic cell phone fees, maintenance & repairs, and rent. Commissioned sales employees can also claim a percentage of home insurance and property taxes. Mortgage interest or payments cannot be claimed by employees.

Maintenance expenses are limited to items like light bulbs, servicing the furnace, or other similar expenses for the entire home. Capital expenses like major renovations are not maintenance expenses. There is a good list on the CRA website you can review; search “CRA home workspace expenses”.

You can claim office supplies using this simplified method.

When determining which method to use, keep in mind your total operating expenses may be limited; the work that is required to calculate the total

expenses; the proof you need to keep in case you are audited; an increased possibility of being audited; and if using a tax preparation firm like ours, additional fees may be charged to claim this expense on your personal tax return.

The Regular Method

If you are claiming vehicle expenses or other employment related expenses, you need to use the regular method: T2200 and T777.

If you worked from home as an employee before COVID, you must use the regular method.

Here is a summary of each of the methods you can use: Temporary Flat Rate Method

- Only if working from home because of COVID

- Employer certification not required

- No receipts required

- Easy calculation: $2 per day; max $400

- No forms to complete

- No other expenses can be claimed (vehicle, office supplies)

- Work space can also be used for personal space

Simplified Method

- Only if working from home because of COVID

- Employer certification required: T2200S

- Receipts required

- Claim the actual amounts paid; supported by documents and receipts

- Need to prorate based on space and hours if shared space

- Need to prorate based on space if dedicated room

- No other expenses can be claimed (vehicle, tools)

- Work space can also be used for personal space (pro rate)

- Reimbursement from employer will reduce deduction

Regular Method

- Worked from home because of COVID or prior to COVID

- Employer certification required: T2200

- Receipts required

- Claim the actual amounts paid supported by documents and receipts

- Need to prorate based on space and hours if shared space

- Need to prorate base on space if dedicated room

- Claim other expenses like office supplies and vehicle

- Work space can also be used for personal space (pro rate)

- Reimbursement from employer will reduce deduction