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Tax 2020: Claiming WFH expenses Due to COVID-19

March 22, 2021

The basics

If you’ve temporarily worked from home in 2020 due to the pandemic, you could get a tax break. The Canadian government is allowing individuals who worked from home for more than 50% of the time over a 4 consecutive week period in 2020 to deduct home office expenses.

That means, if you’ve been working from home since March 2020 and have not returned to the office, you are eligible to claim a deduction for your expenses due to working from home.

How do you claim these home office expenses?

There are two methods you could use to claim expenses you’ve incurred for working from home in 2020 due to COVID-19:

(1) the flat rate method and

(2) the detailed method.

On your tax return, you would take the deduction on line 22900 “Other Employment Expenses”

In this post we will cover the difference between the two methods and explain the “detailed method” in some detail (pun intended!).

The flat rate method

You can claim this deduction if your employer did not reimburse you for your home expenses.

The flat rate method allows you to claim $2 per day for a 4-week period + $2 for any other days you’ve worked from home up to a maximum of $400. Simply put, the flat rate method allows you to claim a deduction of up to $400.

The detailed method

If you believe that your home office expenses were greater than $400, you claim expense deductions using the detailed method. However, in order to do this, you will need a T2200-s form which is a “Declaration of Conditions of Employment for Working at Home Due to COVID-19” from your employer.

In addition, you will need to meet the following criteria:

  1. You were required to pay for expenses for the workspace in your home
  2. Your expenses are directly used for work

If you’ve received a T2200-s form from your employer and you meet criteria (1) and (2) above, you can claim detailed expenses on form T777S which is the “Statement of Employment Expenses for Working From Home Due to COVID-19”.

For the purposes of your tax return, you do not need to submit formT2200-s with your tax return. You simply keep it for your records in case the CRA asks to see it. However, you will need to submit form T777S where you’ve claimed detailed expenses.

How do you use Form T777S?

You can use form T777S to claim deductions for the following eligible expenses:

  • electricity
  • heat
  • water
  • utilities portion (electricity, heat, and water) of your condominium fees
  • home internet access fees (not including the costs to lease a modem/router)
  • maintenance and minor repair costs
  • rent paid for a house or apartment where you live

The expenses have to be pro-rated by the square footage used for your workspace in your home. In order to determine how much you will have to claim on line 37 of form T777S, you can use the CRA’s calculator to determine what this amount should be.

If you’re like me and like the see the magic behind the calculation, let’s take a look at an example to understand how the calculator works:

Jane Doe lives in a 900 square feet condo and has been working from home since the start of the pandemic on March 13, 2020 to December 31, 2020. Jane’s workspace in her condo is 50 square feet, therefore her expenses will be prorated by 50/900 or 5.56%.

Jane’s expenses from March 13, 2020 to December 31, 2020 are as follows:

  1. Rent for the condo: $12,000
  2. Electricity: $500
  3. Internet access fees: $300
  4. Repair costs for the entire condo: $200
  5. Repair specifically for the workspace in her condo: $100

In order to calculate the employment use amount, Jane would take the sum of expenses (1) to (4) above which is: $13,000 ($12,000 + $500 + $300 + $200) prorated by 5.56% which gives you: $722 = $13,000 * 5.56%. The $100 of repair spent specifically for her workspace would be added to the $722 amount to get a final amount of: $822 = $722 + $100.

Note: If you live in a condo you can claim a portion of your condo fees that related to heat, water, and electricity. If you live in a condo and paid expenses for heat, water, and electricity directly to service providers, no portion of your condo fees is deductible.

On form T777S you can also claim expenses on line 1 and 2 for the following:

  • Office supplies (ex. folders, highlighters, ink cartridges, notebooks, printer paper, etc.)
  • Phone expenses for the use of employment (ex. long-distance charges incurred for employment purposes)

No proration is required for these expenses.

The Bottom Line

Don’t overlook the WFH deduction you can claim on your tax return for 2020. At the very least, you can be eligible to claim a $400 deduction. If your employer has given you a signed form T-2200s, you could possibly claim a bigger deduction. If using the detailed method is complicated, get in touch with us today and we would be happy to help you!

Let us help you. Do you have any questions? Email us: info@verticalcpa.ca

The accounting and tax information provided in this post does not constitute advice and is meant to be for general information purposes only. The information is current as at the date of this post and does not reflect any changes in accounting and/or tax legislation thereafter. Moreover, the information has been prepared without considering your company or personal financial/tax circumstances and/or objectives.

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