Last updated: Oct. 1, 2024 

Home Office Expenses: A Guide for Canadian Employers 

The shift to remote work has become the new normal for many businesses. While it’s been big change for employees, it also created new challenges for employers. One of the biggest questions is: what are my responsibilities when it comes to home office expenses? 

This article will cover everything you need to know as an employer, including what’s covered and what paperwork you need to fill out versus your employees. We’ll also clear up some common misunderstandings, especially for those pandemic tax years. 

Our goal is to help you understand your obligations as an employer and feel confident explaining home office expenses to your staff. Let’s start by explaining how it works. 

How Do Employees Write Off Home Office Expenses in Canada? 

Employees who are required to work from home may be able to claim certain costs related to carrying out their work duties from home. These can include a portion of utilities, internet, and office supplies. The key here is that your employee paid for these expenses but wasn’t reimbursed. 

If your full-time salaried or commission-based employee meets the Canada Revenue Agency (CRA) eligibility requirements, (including receiving a signed T2200, authorized by you) they can claim the expenses and receive a tax deduction. 

As a reminder, a deduction is a dollar-for-dollar reduction in taxable income. By reducing the amount of income employees are taxed on, they pay less tax.  

While it might not directly affect your bottom line, happy employees with more take-home pay can contribute to a positive work environment. Plus, maximizing home office tax deductions can make paying out-of-pocket for some expenses, like paper or toner cartridges, more palatable. 

What Are My Obligations as an Employer? 

The good news is most of the calculating and claiming home office expenses falls on your employees. However, you still have a role to play in helping your employee meet the eligibility requirements for home office expenses and filling out necessary paperwork. Here’s what you need to do: 

1. Work-From-Home Agreement: Your employee needs to have a written or verbal agreement with your company that specifies they must work from home for a certain percentage to complete their duties.   

Productivity Tip: Formalize the work-from-home agreement by including it in your employment contract. This will save time and clearly outline your employees’ work arrangements.  

2. Sign the T2200/T2200S: In 2023, the Canada Revenue Agency (CRA) updated the employment expense form – Form T2200, Declaration of Conditions of Employment – outlining the specific home office expenses your employee must cover. As the employer, you must fill out and sign this form for your employee. While they don’t include the form itself with their tax filing, they must keep it for up to six years if the CRA asks to see it.If your employee is filing taxes for 2020, 2021 or 2022 and they were required/chose to work from home due to the pandemic, you’ll need to fill out and sign Form T2200S, Declaration of Conditions of Employment for Working at Home Due to COVID-19. Employees claim employment expenses at a flat rate of $2 to a maximum of $400 in 2020 and $500 in 2021 and 2022. Again, they don’t file this with their return, but they must keep it for six years. Note that this form is not valid for any other years.  

Productivity Tip: Incorporate filling out the T2200 into your business routines to save time and meet your employer obligations. For example, consider filling it out as part of your employee onboarding process or sending it out with your T4s at tax time. 

Additional Employment Expense Eligibility Requirements 

In addition to the work-from-home agreement and the T2200, there are other eligibility requirements for employee home office expenses that you should understand.  

 For example, if employees don’t work from home regularly or for long enough periods, they cannot claim expenses. By being informed about these factors, you can provide clear guidance to your employees, potentially prevent disputes, and decide what work-from-home arrangements are best for your company and your employees. 

 Here are ALL of the CRA eligibility criteria:  

1. Remote Work Requirement: Your employee must have (or have had) a verbal/written agreement specifying that they work from home or were required/chose to work from home in 2020, 2021, or 2022 due to the pandemic. 

2. Employee Expenses: Your employees must pay for their home office expenses. They cannot claim any costs you reimbursed as their employer. 

3. 50% or More Working from Home: The employee must either: 

1. 1. Work from their home office (more than 50% of the time) for at least four consecutive weeks in the year, which can be longer than one month. They can have more than one eligible period during the year and claim each period.  
   2. Or they only use their home workspace to generate employment income and regularly and continually conduct in-person meetings with clients, other employees, etc. 

Home Workspaces: Your employee can work in a designated home office space (e.g., a spare room) or a common area used for other purposes (e.g., the kitchen table, the family computer room, etc.). Either arrangement works for the CRA but requires different calculations when claiming expenses.

4. Expenses: They must have used certain eligible expenses directly for their work—otherwise, they have nothing to claim. 

5. Form T2200 or Form T2200S: 

1. 1. They have a completed and signed copy of Form T2200, Declaration of Conditions of Employment, which you filled out as their employer.  
   2. Or they have a completed and signed copy of Form T2200S, Declaration of Conditions of Employment for Working at Home Due for years 2020, 2021, or 2022, which you filled out as their employer.
       

Remember: If your employee didn’t pay for it, they can’t claim it. For example, if they take office supplies from work and use them at their home office, they cannot turn around and claim them as an expense. No double-dipping! 

What Home Office Expenses Can My Employee Claim?  

Admittedly, this is where it gets complicated. Depending on whether they’re salaried or earn commission income, different expenses can qualify for deductions. 

Eligible expenses are generally costs directly related to their work. Think about it like this: would they still buy these things if they didn’t have to work from home? If the answer is no, it probably counts.

What’s not covered? Unlike self-employed contractors, most employees cannot claim things like mortgage interest, furniture, or most capital expenses. However, there are some exceptions for those earning commission-based income. 

Here is a summary of the CRA’s eligible employee expenses:  

Deductibles for Salaried and Commission Employees	Additional Deductibles for Commission Employees
Accounting and legal fees	Advertising and promotions
Allowable motor vehicle expenses (including capital cost allowance)	Food, beverages, and entertainment expenses
Travelling expenses	Lodging
Parking costs	Additional other expenses (lease of cell phone, laptop, other equipment, etc.)
Supplies (pens, paper, ink cartridges, etc.)	Additional work-space-in-the-home expenses (property tax, home insurance)
Other expenses (salary for an assistant, office rent, reasonable cell phone plan, etc.)
Office Supplies
Work-space-in-the-home expenses (portion of electricity, heating, maintenance, internet access fee)

 

Cannot Be Claimed

Mortgage interest payments

Principal mortgage payments

Home internet connection fees

Furniture

Capital expenses (replacing windows, flooring, furnace, etc.)

Wall decorations

Additional Eligible Employment Expenses 

Even if your employees don’t work from home or earn commission income, they may still qualify for certain employment expenses: 

• Trades and Apprentice Mechanics: Employed tradespeople and apprentice mechanics can deduct the cost of eligible tools (including a GST/HST rebate) they bought to earn income. You need to answer question 11 of Part B on T2200 to confirm the tools they claim are essential to completing their job duties.  

• Forestry Operations: Employees who work in forest operations and must buy their own power saw (including chain saw or tree trimmer) to earn income can deduct these costs (including a GST/HST rebate).  

• Transportation and Long-Haul Truckers: The CRA allows transportation employees and long-haul truckers to claim meals and lodging expenses they incur while working. As the employer, you must fill out Part 3 of Form TL2 Claim for Meals and Lodging Expenses so your employee can deduct these expenses. 

How Much Can Your Employees Claim? 

Once your employees determine what expenses qualify as work-from-home costs, they are responsible for calculating how much they can claim. There are two methods, depending on the tax year:  

The Detailed Method  

This method is used for tax years 2023 and beyond or 2019 and prior. While this method involves more effort, it could potentially result in a more significant claim for your employees. In general, they will: 

1. Measure the Workspace: Figure out the square meters/footage of the dedicated home office area. 
2. Calculate the Percentage: Divide the home office square meters/footage by the total square footage of your home. Multiply this number by 100 to get the total percentage of the workspace. 
3. Fill out the T777: They must fill out the T777 Statement of Employment Expenses and file it with their tax return.  
4. Claim It on Their Tax Return: They take the total amount from line 9368 on Form T777 and enter it into line 22900, “Other employment expenses,” on their tax return. The employee must keep a completed and signed copy of Form T2200 but not include it with the tax return. 

Luckily, the CRA has an online employee expense calculator that can walk them through the detailed method step-by-step. 

The Simplified Method  

For tax years 2020, 2021 and 2022 only, employees can claim a flat rate of $2 per day working from home, up to a maximum of $400 for 2020 and up to $500 for 2021 and 2022. If they’re filing taxes for the pandemic years, they need to: 

1. Calculate Work-From-Home Days: They need to total the number of days they spent working from home and multiply this by $2. Again, the total cannot exceed the proper maximum. 
2. Fill Out the T777S: They must complete the T777S Statement of Employment Expenses for Working at Home Due to COVID-19 and file it with their tax return.  
3. Claim it on their tax return: They take the total amount from line 9368 on Form T777S and enter it onto line 22900, “Other employment expenses,” on their tax return. The employee must keep a completed and signed copy of Form T2200S but not include it with the tax return. 

They can also use the same CRA online employee expense calculator to help them. 

Remember, completing the T777/T777S form is solely the employee’s responsibility.  

Work-From-Home Scenarios 

To help illustrate how this all comes together for your employees, let’s explore some different working-from-home arrangements: 

 Scenario 1: John, the Project Manager 

 John, a full-time project manager at a construction company, received an email from his employer informing him that he would have to work from home full-time for six months in 2023 due to office renovations. Because John was required to work exclusively from home for at least four consecutive weeks, he is eligible to claim work-from-home expenses for that period. To calculate his deduction, John must use the detailed method. 

 Employer Obligations: The email that informed John about the renos qualifies as a work-from-home agreement. All the employer needs to do is fill out and sign the T2200 so John can accurately claim home office expenses and get his tax deduction.
 

 Scenario 2: Maria, the Non-Commission Sales Representative 

 Maria is a non-commission sales representative who occasionally works from home to avoid commuting. However, she typically works from her employer’s office. Since Maria doesn’t meet the requirement of working from home more than 50% of the time for at least a month and does not earn commission income, she cannot claim work-from-home expenses. 

 Employer Obligations: Maria’s employer is not obligated to take any action in this case as she does not meet the eligibility requirements to claim home office expenses. 

 

Scenario 3: Mike, the Self-Employed General Contractor 

 Mike is a self-employed general contractor specializing in home renovations and additions. When not working on a job site, he uses a dedicated home office space exclusively for his business. As a self-employed individual, he can claim a significant portion of their home office expenses as a business expense.  

 Employer Obligations: Mike is his own boss, so he is subject to an entirely different set of tax rules.  

 Read “What self-employed contractors need to know about taxes” 

 

Scenario 4: Sarah, the Office Administrator 

 Sarah is an office administrator employed by a mid-sized transportation and logistics company. In early 2022, due to COVID-19 restrictions, she had to work from home for four consecutive months. As a result, she was eligible to claim up to $500 in home office expenses using the simplified method. 

 Employer Obligations: Sarah’s employer must complete and sign the T2200S so that she can make the claim and receive the deduction.
  

Employee Mistakes and Misconceptions 

Understanding the rules and recognizing some common pitfalls regarding home office expenses is essential. Here are a few mistakes you can help your employees avoid: 

• Employee vs. Self-Employed: One of the biggest misunderstandings is the difference between employees and self-employed individuals. Employees claim home office expenses through the T777/T777S form, while self-employed individuals have different rules and forms. 

• Overclaiming: It’s crucial to calculate expenses accurately and avoid overclaiming, which could result in a tax audit. Remember, they cannot claim any expenses you cover as their employer. 

• Incorrect Calculations: Errors in calculating the home office space or eligible expenses can result in incorrect deductions. 

• Mixing Personal and Business Expenses: As with your own business, encourage your employees to keep detailed records to separate personal expenses from those related to completing their work duties. 

• Ignoring the T2200/T2200S: While the T2200/T2200S does not need to be filed with their tax return, employees must keep the completed form for up to six years after filing. You must complete and sign the right forms for your employees. 

Best Practices for Employers 

When everyone is on the same page about home office expenses, the process is less stressful for everyone.  

To help provide clarity, consider incorporating these best practices into your workplace: 

• Home Office Expense Policy: Create a clear policy that outlines eligible expenses, calculation methods, and required documentation to manage expectations and reduce confusion. 

• Amend Your Employment Contract: Include a written work-from-home agreement in your employment agreement to help your employee understand your expectations and meet CRA eligibility requirements. Consider referencing your Home Office Expense Policy in the employment contract so they know what expenses are reimbursed. 

• Provide Necessary Forms: Make sure to fill out the T2200/T2200S form and give it to your employees. Consider incorporating this into your business practices so you don’t forget (i.e., include it as part of your onboarding process or hand it out with T4s at tax time). 

• Offer Guidance: You don’t need to be a tax expert, but you do need to answer questions about what expenses are covered and not covered.  

• Maintain Accurate Records: Keep copies of all approved employee expense claims for your records.   

• Stay Informed: Stay up-to-date on tax regulations and employment expense rule changes. 

Conclusion: Clarity Provides Peace of Mind 

Helping employees deal with home office expenses isn’t the most exciting part of running a business, but it doesn’t have to be a pain.  

By setting up clear guidelines and fulfilling your role as an employer – providing a work-from-home agreement and the necessary T2200/T2200S form – you’ll help your team focus on their work and not stress about out-of-pocket expenses. 

Remember, a happy and productive team helps build a successful business. So why not make claiming home office expenses a smoother, more straightforward process for everyone? 

As always, we recommend consulting a tax specialist if you have questions or need more specific advice. And, of course, we’re always happy to see how we can help. 

About FBC

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Disclaimer: The material above is intended for educational and informational purposes only. Always consult a qualified tax advisor like FBC regarding your specific tax situation.