Introducing a simplified process for claiming the home office expenses for Canadians working from home due to the COVID-19 pandemic

OTTAWA, ON, Dec. 15, 2020 /CNW/ - This year has been filled with unprecedented challenges due to the COVID-19 pandemic. Many Canadians unexpectedly had to work from home which resulted in millions of Canadians setting up their work space in their kitchens, bedrooms and living rooms.

In response, the Honourable Diane Lebouthillier, Minister of National Revenue, provided today additional details on how the Canada Revenue Agency (CRA) has made the home office expenses deduction available to more Canadians, and simplified the way employees can claim these expenses on their personal income tax return for the 2020 tax year. Employees with larger claims for home office expenses can still choose to use the existing detailed method to calculate their home office expenses deduction.

Employees who worked from home more than 50% of the time over a period of a least four consecutive weeks in 2020 due to COVID-19 will now be eligible to claim the home office expenses deduction for 2020. The use of a shorter qualifying period will ensure that more employees can claim the deduction than would otherwise have been possible under longstanding practice.

A new temporary flat rate method will allow eligible employees to claim a deduction of $2 for each day they worked at home in that period, plus any other days they worked from home in 2020 due to COVID-19 up to a maximum of $400. Under this new method, employees will not have to get Form T2200 or Form T2200S completed and signed by their employer.

To simplify the process for employees choosing the detailed method, the CRA launched today simplified forms (Form T2200S and Form T777S) and a calculator designed specifically to assist with the calculation of eligible home office expenses.

For more information on working from home expenses go to Canada.ca/cra-home-workspace-expenses.

Quotes

"The Government of Canada remains committed to helping Canadians cope with the impacts of the COVID-19 pandemic by making the home expenses deduction more accessible, and easier to claim. The temporary flat rate method and the new user-friendly calculator will make it easier for more Canadians to claim the deductions and is one more demonstration of the CRA's commitment to ensuring our tax system meets the needs of Canadians."

-The Honourable Diane Lebouthillier, Minister of National Revenue

"Chartered Professional Accountants of Canada is among those key organizations that have been working closely with senior CRA and Finance Canada officials, providing expertise and feedback to better streamline the approach on home office expenses for employers and employees. We recognize that the CRA has taken a number of steps to make claiming working at home costs easier for employees and to reduce the compliance burden for those employers who provide T2200 forms to their employees." 

-Bruce Ball, Vice-President, Tax, Chartered Professional Accountants of Canada

"We commend the government for collaborating with key stakeholders, including Canada's payroll professionals. Today's announcement is a 'win-win' for Canadian businesses and workers alike. It provides a fair and straightforward way for millions of workers, forced to work from home by the pandemic, to claim tax deductions for which they are eligible. Waiving the employee's need for a T2200 or T2200S will save employers over $194 million collectively, while being able to focus more intently on critical business needs. The Canadian Payroll Association looks forward to continuing to work alongside the government to support Canada's economic recovery in the year ahead."

-Peter Tzanetakis, President, The Canadian Payroll Association

Quick Facts

• Home office expenses can be claimed as a deduction on an employee's personal income tax return. Deductions reduce the amount of income they pay tax on.
• For those using the detailed method to calculate their home office expenses, the CRA has expanded the list of eligible expenses that can be claimed to include home internet access fees. A comprehensive list of all eligible expenses is available online.
• According to Statistics Canada, "Working from home continues to be an important adaptation to COVID-19 health risks, with 2.4 million Canadians who do not normally work from home doing so in October."
• The CRA engaged many stakeholders in the fall of 2020 about the simplified Form T2200 and work-space-in-the-home expenses prior to introducing these temporary measures. For more information, go to the Backgrounder – Consultation on the simplification of Form T2200.
• The new temporary flat rate method to calculate the deduction for home office expenses was announced on November 30th in the Fall Economic Statement.

Associated Links

• Backgrounder – Simplifying the process for claiming a deduction for home office expenses
• Backgrounder – Employer-provided Benefits and Allowances: CRA and COVID-19
• Backgrounder – Consultation on the simplification of Form T2200
• Home office expenses for employees
• Frequently asked questions – Home office expenses for employees
• Form T2200S Declaration of Conditions of Employment for Working at Home During COVID-19
• Form T777S - Statement of Employment Expenses for Working at Home Due to COVID-19
• Infographic: Working from home?

BACKGROUNDER

Simplifying the process for claiming a deduction for home office expenses for employees working from home due to COVID-19

As a result of the unprecedented challenges due to COVID-19, many people have been working at home and using their kitchens, bedrooms and living rooms as their work space. In response, the Canada Revenue Agency (CRA) has introduced a new temporary flat rate method to simplify claiming the deduction for home office expenses for the 2020 tax year.

As an employee, you may be able to claim a deduction for home office expenses (work-space-in-the-home expenses, office supplies, and certain phone expenses). This deduction is claimed on your personal income tax return. Deductions reduce the amount of income you pay tax on, so they reduce your overall income tax liability.

Eligibility
You are eligible to claim a deduction for home office expenses for the period you worked from home, if you meet all of the criteria:

• you worked from home in 2020 due to the COVID-19 pandemic or your employer required you to work from home
• you 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 Form T2200S or Form T2200 from your employer (only applicable if the detailed method is used to complete the claim)
• the expenses are used directly in your work during the period

The use of a shorter qualifying period will ensure that more employees can claim the deduction than would otherwise have been possible under longstanding practice.

New temporary flat rate method
The new temporary flat rate method simplifies your claim for home office expenses. You are eligible to use this new method if you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020 due to the COVID-19 pandemic. You can claim $2 for each day you worked from home during that period plus any additional days you worked at home in 2020 due to the COVID-19 pandemic. The maximum you can claim using the new temporary flat rate method is $400 (200 working days) per individual.

Each individual working from home who meets the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses. This means multiple people working from the same home can each make a claim.

This method can only be used for the 2020 tax year.

Simplified process for the temporary flat rate method
You do not have to: calculate the size of your work space, keep supporting documents or get Form T2200 completed and signed by your employer.

What counts as a work day

• days you worked full-time hours from home
• days you worked part-time hours from home

What days do not count

• days off
• vacation days
• sick leave days
• other leave or absence

Expenses that are covered by the $2 a day flat rate
The temporary flat rate method is used to claim home office expenses. You cannot claim any other employment expenses (line 22900) if you are using the flat rate method.

Using the detailed method to claim your deduction for home office expenses
You can use the detailed method to claim the home office expenses you paid for the period that you worked from home.

Simplified process for using the detailed method if you worked from home due to the COVID-19 pandemic
To support you, the CRA:

• created a simplified Form T2200S and Form T777S
• created a calculator to help you claim the home office expense deduction that you are entitled to
• will accept an electronic signature on the Form T2200S and Form T2200 to reduce the necessity for employees and employers to meet in person (applies to the 2020 tax year only)

What is Form T2200S?
Form T2200S, Declaration of Conditions of Employment for Working at Home During COVID-19 is a shorter version of Form T2200 that you get your employer to complete and sign if you worked from home in 2020 due to the COVID-19 pandemic and are not using the temporary flat rate method. Your employer completes and signs this form to certify that you worked from home in 2020 due to COVID-19 and had to pay your own home office expenses.

What is Form T777S?
Form T777S, Statement of Employment Expenses for Working at Home Due to COVID-19,  is used to calculate your claim for home office expenses.

How to determine the employment use of a work space
Whether you work at the dining table or in a spare bedroom, there are several factors to consider when calculating your employment use of the work space:

• Size of your home and work space
• Types of work spaces
• Hours per week you use the space for work

New eligible expenses
The CRA has expanded the list of eligible expenses that can be claimed to include home internet access fees.

A comprehensive list of eligible home office expenses has also been created.

For more information on working from home expenses go to Canada.ca/cra-home-workspace-expenses.

Stay connected
To receive updates when new information is added to our website, you can:

• Follow the CRA on Facebook
• Follow the CRA on Twitter – @CanRevAgency
• Follow the CRA on LinkedIn
• Subscribe to a CRA electronic mailing list
• Add our RSS feeds to your feed reader
• You can also watch our tax-related videos on YouTube

SOURCE Canada Revenue Agency

Jeremy Bellefeuille, Press Secretary, Office of the Minister of National Revenue, 343-551-0898, [email protected]; Media Relations, Canada Revenue Agency, 613-948-8366, [email protected]

Related Links

http://www.cra-arc.gc.ca/