Working from Home?
You might be able to save on taxes! Find out what you can and cannot claim on your income tax return.
You have finally set up your home office to do your part to stay home and help flatten the coronavirus curve. The question now is: Can you write off work from home expenses during the pandemic at the time of filing your taxes?
Eligible applicants must meet one of two conditions: prove that their home was their principal place of work or where they worked for 50 per cent of the time during the tax year, or that they used their home office solely for income purposes and regularly hosted clients or customers there. The 50-per-cent threshold is only needed for “office space expenses” such as rent, utilities, and maintenance. Those who are not eligible could still claim expenses for supplies.
If you are self-employed, continue with your regular tax processes until you hear otherwise from the Canada Revenue Agency (CRA).
Salaried employees will need form T2200 from their employer which tells the CRA what aspects of your work are mandatory and for which you have incurred costs when you work from home. For example, salespeople who travel a lot with their own personal vehicles are provided with form T2200; but someone who works from home majority of the time may qualify to deduct these expenses as well.
Here is a list of expenses you may or may not be able to claim on your 2020 income taxes, whether you have a T2200 or not.
1. Masks and Sanitizers
Unfortunately, masks and other PPE are not deductible—unless you are working in a field that requires it.
2. Home office furniture
Office chairs, a new desk or computer monitor are considered capital costs that employees cannot automatically deduct. However, according to the Government of Canada, you can deduct the cost of supplies you paid for if under your contract of employment, you had to provide and pay for the supplies and you used the supplies directly in your work. It is important that your employer has not repaid and will not repay you for these expenses and you have a copy of the T2200 form, Declaration of Conditions of Employment, which has been completed and signed by your employer.
3. Workspace expenses
These expenses include rent, home insurance, utilities, etc. To deduct a portion, the property needs to be the place where you principally work or is used solely to earn income from your employment. If you meet the requirements, you can deduct a portion of those expenses based on total area used for workspace.
4. Mortgage and property taxes
You can only claim these if you work on commission, in which case you can deduct a reasonable amount from the total costs with your T2200.
5. Internet and telephone
You can only claim the portion that you use for business purposes. As per CRA, you could deduct a portion of your basic plan with a T2200 if the plan is reasonable and you can confirm the cellular minutes or data consumed directly in the performance of your employment duties.
Upcoming tax announcements
Income tax rules on working from home could change when the federal government returns in the fall, but nothing has been changed as of now.
Finjoy Capital is not a financial advisory firm.
This article is for informational purposes only and is not a substitute for individualized professional advice.