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CRA simplifies deducting home office expenses

Millions of Canadians transitioned to working from home in 2020.

Many found themselves cranking up the heat in a drafty house, or using their personal cellphone to make work calls, or picking up supplies for the basement/kitchen table/closet that now functions as their office. To help offset these coststhey are eligible to deduct home office expenses on their 2020 personal tax returns.   

That might sound like a lot of calculations and paperwork, but the good news is that the CRA has introduced a simpler way for employees to claim home office expensesThis means employees won’t have to calculate the size of their workspace or keep supporting documents like receipts to claim this tax deduction. And best of all, employers won’t need to provide a signed T2200 tax form for every employee.   

We have summarized the changes below so you’re aware of the CRA obligations you may have if your employee(s) wish to deduct home office expenses for the 2020 tax year.  

What’s new?

On Dec. 15, 2020, the Canada Revenue Agency (CRA) released detailed guidance on the home office expense deduction that employees can claim on their 2020 personal income tax return.  

Here’s what new for the 2020 tax year:  

  • The new method to claim home office expenses is called the “temporary flat rate method” and allows employees to claim up to $400 in home office expenses in the 2020 tax year. The existing “detailed method” continues to be available for salaried or commissioned employees who want to claim a larger tax deduction 
  • The CRA has introduced a simplified version of the T2200 tax form. The new T2200S form will apply in situations where employees are working from home due to the pandemic and are only seeking to deduct the cost of office supplies and home office expenses. 

What is the temporary flat rate method?

The new temporary flat rate method simplifies claims for home office expenses and can only be used for the 2020 tax year.  

The employment expense claim is a deduction of $2 per at-home workday to a maximum of $400, which works out to 200 working days.  

Who is eligible?

To claim the home office expense deduction under the temporary flat rate method, your employee(s) must meet the following conditions:  

  • Worked from home in 2020 due to the pandemic  
  • Worked more than 50% of the time from home for a period of at least 4 consecutive weeks in 2020  
  • Were not reimbursed for all of their home office expenses 
  • Are only claiming home office expenses and not any other employment expenses  

Any days your employee(sworked full-time, or part-time, hours from home are eligible. Days off, vacation days, sick leave days and other leaves or absences are not eligible.  

Multiple people in the same home can make the claim if they meet the eligibility criteria.  

Do I need to complete a T2200 form or T2200S form for my employee(s)?

No, you won’t need to complete a form if your employee(s) choose to use the temporary flat rate method for the 2020 tax year. In addition, your employee(s) won’t need to calculate the size of their workspace or keep supporting documents like receipts to claim this tax deduction.  

What is the detailed method? 

The “detailed method” is similar to the existing deduction for home office expenses, except that the category of eligible expenses has been expanded to include home internet access fees. 

Who is eligible?

Employees are eligible to claim a deduction for home office expenses for the period they worked from home, if they meet the following conditions:  

  • Worked from home in 2020 due to the pandemic or their employer required them to work from home 
  • Worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020 
  • Have a completed and signed T2200S form or T2200 form from their employer  
  • The expenses were used directly in their work during the period of time  

What can employees claim under the detailed method?

All salaried employees and commission employees can claim: 

  • Electricity 
  • Heat  
  • Water 
  • Utilities portion (electricity, heat, and water) of their condominium fees · 
  • Home internet access fees  
  • Maintenance and minor repair costs 
  • Rent paid for a house or apartment where they live 

Commission employees can also claim: 

  • Home insurance  
  • Property taxes  
  • Lease of a cell phone, computer, laptop, tablet, fax machine, etc. that reasonably relate to earning commission income 

Do I need to complete a T2200 form or T2200S form for my employee(s)?

For employees seeking to deduct expenses using the detailed method, the T2200 form or T2200S form will be required from the employer.  

If they’re only seeking to deduct office supplies and home office expenses, the Form T2200S is sufficient.  

It’s a relatively straightforward form. All you need to do as the employer is confirm: 

  • Your employee(s) worked from home due to COVID-19 
  • Whether they were reimbursed for any of their home office expenses 
  • If you included the reimbursement amount on their T4 slip 

The T2200S form cannot be used by employees wishing to claim other employment deductions, such as motor vehicle expenses. 

In this case, they must complete the T2200 tax formThis form generally applies to employees who have been traditionally receiving these forms from you in previous years 

Do I have to sign the forms in person?

No. The CRA will accept an electronic signature on the T2200S or T2200 form for the 2020 tax year only.   

Which method should my employee(s) use to support their claim? 

It’s up to your employee(s) to decide if they will use the temporary flat rate method or detailed method to claim home office expensesIf your employee(s) choose to claim the temporary flat rate methodthey don’t need a signed form from you and there is no documentation required to support the claim.  

If they wish to go the detailed route, then the employee should request a T2200S or T2200 from you, depending on which employment deductions they wish to claim   

Contact FBC 

Given everything that happened last year, this tax season will be different. Government support programs, new T4 reporting requirements, and other tax changes could have an impact on your 2020 tax returns.  

 What you need right now more than anything is a long-term partner in your business – a tax specialist with a full suite of services that will give you their full attention, get to know you and your business, and provide you with the right tax advice.   

FBC is here to support your small business with CRA compliance, tax-saving strategies, and a suite of back office financial supports that reflect the current and ongoing COVID-19 challenges.We’re offering a free consult where we get to know your business and determine next steps on saving you time and money. If you’d like to learn more, please call us at 1-800-265-1002 or email fbc@fbc.ca.  You can also book an appointment.