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What is a home office tax deduction in Canada?

If you are an employee of a company you may be able to claim certain home office expenses as deductions against your income.  This in return will reduce your overall income tax liability and so reduce the amount of tax you will pay.

This deduction would be claimed on your personal income tax return on line 22900.

We will dive into what you can claim, how you can claim it, and who is eligible in more detail.

Methods of claiming a home office tax deduction

There are two methods to claiming these deductions, either a flat rate per day, or you can claim a proportion of the actual amounts you paid.  There are benefits to both, but one requires more work than the other.  Let’s compare them:

Flat Rate Method

This method uses a temporary flat rate of $2 per day that you can claim against working from your home office up to a maximum of $400.  The method is for eligible employees working from home in 2020 due to the covid pandemic.

This is by far the simplest method as it doesn’t require your employer to complete and sign a T2200 form, nor does it require you to keep documental records of your expenses through the year.

It is a simple calculation that requires little support to back this up.

Detailed method

The alternative is to be more detailed in your claim in order to claim the actual amounts you paid for each item or service you use for your home office (we explore these individual items in more detail below).

This method is for eligible employees working from home and eligible employees that were required to work from home during 2020 because of the pandemic.

In order to claim through this method, you will need to complete the T2200S form and your employee will need to fill in the T2200 form.  You will also have to support all claimed amounts with documental evidence for those expenses.

Eligibility for a home office tax deduction

Let’s have a quick look at what the eligibility criteria are both the flat rate method and the detailed method

Flat rate method – eligibility

Each employee working from home must meet all of the following conditions in order to claim the flat-rate deduction for their home office

  • You worked from home in 2020 due to the COVID-19 pandemic
  • You worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020
  • You are only claiming home office expenses and are not claiming any other employment expenses on line 22900 of your tax return
  • Your employer did not reimburse you for all of your home office expense

Direct rate method – eligibility

In order to claim the actual expenses you paid for working from home you need to meet all of the following conditions

  • Either, you worked from home in 2020 due to the pandemic, or your employer required you to work from home due to the pandemic
  • You were required to pay for expenses related to the workspace in your home
  • Either your workspace is where you spend more than 50% of the time for a period of at least four consecutive weeks, or you use your workspace to earn employment income, meet clients, customers, or other people while doing your work
  • Your expenses are used directly in your work
  • Either you have completed and signed a T2200S form or your employer has completed and signed the T2200 form

What can and can’t be claimed through the detailed method

If you are claiming the flat rate then your work is done, there is nothing more you need to do or prove.

If you are claiming through the detailed method then there are a number of things you can claim for, and also many you can’t.  Let’s break them down:

Can be claimed

For all salaried employees you can claim:

  • Electricity
  • Heat
  • Water
  • Utility portion (all the above) of your condominium fees
  • Home internet access fees
  • Maintenance and minor repair costs
  • Rent paid for a house or apartment where you live

If you are a commission employee then you can also claim:

  • Home insurance
  • Property taxes
  • Lease of a cell phone, computer, laptop, tablet, fax machine that are reasonably related to your earnings

NB: You can also claim for office supplies if your employer requires you to cover those expenses, though these would be claimed in a different section and are not considered to be related to your physical workspace.

Can’t be claimed

  • Mortgage interest
  • Principal mortgage repayments
  • Home internet connection fee
  • Furniture
  • Capital expense
  • Wall decorations

One more step for the detailed method claim

Before diving into the detailed method and going through all your bills in order to make your claim for home office tax deduction there is one more step you need to do before determining how much of those expenses you can claim for. 

You need to work out the size of your workspace!

You can calculate your home office size using a purpose-built calculator here, but to give you an idea of how this calculation is worked out let’s break it down:

First, you calculate the size of your home in square feet or square meters.  All finished areas of your home count towards the total size including hallways, bathrooms, and kitchen, as well as bedrooms and living spaces.

Next, you work out the size of your workspace in square feet or square meters.  This should be a reasonable amount of space around where you work, so your desk or seat. 

If you have allocated an entire room as an office then you can include the size of the room. 

If your workspace is in a shared or open planned room you would use a reasonable amount of the space, not the whole space.

Once you have determined the size of your house and the size of your workspace you can calculate the percentage of your house that is dedicated to your workspace.  The calculation for this is:

Size of workspace ÷ size of your home x 100 = percentage of your house dedicated to your work.

Once you have determined the percentage of the house that your workspace takes up, you will use this percentage to determine how much of your bills and household expenses that are claimable can be deducted.

For example – You’re workspace is 10% of your total house size, and your total for all expenses you can claim is $10,000.  The amount you will be able to claim is $1,000 (10% of $10,000).

If you have been working from home for an extended period of time during the pandemic then you should be claiming a home office tax deduction if your employer has not paid any of your expenses.

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