Paid employment is the source of income for a vast majority of Canadians. The Canadian law mandates every employed individual to file their annual income tax return as at when due. In doing this, there are tax exemptions and tax deductibles that could reduce each taxpayer’s payable tax for every tax year. One such is the T2200 – Declaration of Conditions of Employment.
The Canada Revenue Agency (CRA) issues out Form T2200, which permits home office expenses deductions against the employee’s income. Canadian employers must provide Form T2200 to eligible employees to claim the home office deduction on their income tax return.
What is the T2200 Form?
The Canadian Income Tax Act provides that employees can claim certain deductions against their employment income through a form signed by their employer. It is the employers’ duty and responsibility to give the T2200 Form and certify that the conditions for the deduction have been satisfied by the employee.
The T2200 Form, also known as the Declaration of Conditions of Employment, is provided by an employer to eligible employees to claim expenses, including home office, motor vehicles, etc.
As an employer, you’re required to provide the T2200 Form to your employees who may be able to claim employment expenses on their income tax and benefit return for the expenses they incur while doing their job.
As an employer, you are only required by law to fill out and sign the Declaration of Conditions of Employment form to certify that the employee met the eligibility conditions for expenses deductions. It’s the responsibility of the employee to claim the expenses in their income tax return. No employee can claim deductions in their employment income without the T2200 Form, duly signed by their employer.
Characteristics of the T2200 Form
The T2200 Form is a multi-page document of 13 questions titled “Declaration of Conditions of Employment.” The Form has to be completed, signed and certified by an employer and given to an employee. However, a signed T2200 form does not guarantee that an employee will get deductible expenses incurred while performing official duties. This is a matter to be settled between the employee and the CRA.
Part A of the T2200 Form contains the employee information, including the employee’s full name, job description, social insurance number (SIN) and employer address. Details about the employment condition or contract concerning expenses incurred by the employee while doing their job are also outlined in Part B of the T2200 Form.
The employer must also outline and explain whether the employee was reimbursed for home workspace expenses and how much was given out. All these questions are geared towards establishing the eligibility of the employee for the deductions.
T2200 Tax Rules
Before an employer can complete and sign the T2200 Form and handover the same to an employee to claim their home office expenses deductibles, the employee must meet certain conditions. These include:
1. The employment or contract condition must require the employee to maintain a workspace in their home and pay for the eligible expenses. In this case, the employer will certify the expenses in the T2200 Form to enable the employee to claim deductibles.
2. The workspace usage must meet two conditions:
- The workspace in the home must be the place where the employee mainly performs their employment duties, more than 50 percent of the time.
- The employee uses the workspace to earn employment income and regularly meets customers or clients while carrying out official duties.
Under the Canadian Income Tax Act, eligible employees required to pay their expenses while performing employment duties can claim deductions using the Standard Method. The standard method involves a wide range of employee expenses and a comprehensive set of forms, including the T2200 Form.
2020 Streamlined Options for T2200
As a result of the Covid-19 pandemic, most companies had to resort to allowing their employees to work from home in 2020. Therefore, the number of employees working from home increased in that year, such that employers expressed concerns over its significant impact on their finances and other administrative burdens.
Interestingly, the Canadian government addressed the administrative burden on employers and employees. The Canada Revenue Agency (CRA) released detailed guidelines and tools for the home office expenses deduction for the 2020 tax year. The CRA announced the T2200S Form – Declaration of Conditions of Employment for Working at Home Due to Covid-19, an abbreviated version of the T2200 Form.
As a result, there are two distinct forms that employers can issue to their employees to file home workspace-related expenses deduction:
The T2200 (Declaration of Conditions of Employment) is a form that employers complete and sign to certify their employees’ employment conditions based on home workspace expenses.
The T2200S (Declaration of Conditions of Employment for Working at Home Due to Covid-19) is a shorter version of the T2200. Employers will complete and issue the T2200S to certify that eligible employees worked from home in 2020 due to the Covid-19 pandemic. The employer will also confirm that the employee paid some or all the home office expenses while carrying out their employment duties. The T2200S is issued to employees who worked from home in 2020 due to Covid-19 and wished to use the Detailed Method to deduct their home office expenses.
Unlike the T2200S, which is Covid-19 related, employees who worked or usually work from home and wish to claim employment income deductions, including home office expenses, office supplies, and phone expenses, must obtain the T2200 Form from their employers. However, if all the home office expenses are (or will be) reimbursed by the employer, the employee cannot make deduction claims. Also, depending on the method of calculating the home office expenses using the T777S, employees may not need the T2200 or T2200S Form.
Methods of Home Office Expenses Claim
For the 2020 tax year, employees can claim deductions through any of the following options:
The Temporary Flat Rate Method
In the temporary flat rate method, employees can claim $2 for each day of working from home during the pandemic period, up to a maximum of $400 per individual. Employees who want to use the temporary flat-rate option will not require the T2200 or T2200S Form from their employers.
Under the temporary flat rate method, your employees can qualify for deductions:
- If they worked from home in 2020 due to the Covid-19 pandemic.
- If they worked more than 50% of the time from home for at least four consecutive weeks in 2020.
- If they weren’t fully or partially reimbursed for home office expenses.
- If they claim home office expenses only and no other employment expenses.
The Detailed Method
The Detailed method requires using the T2200S form – Declaration of Conditions of Employment for Working at Home Due to Covid-19. It has a more expansive range of eligible expenses, including home internet access fees. Employees can claim deductions using the T2200S, signed by their employer, based on eligible expenses incurred while working at home due to the Covid-19 pandemic. Unlike the Temporary flat rate method, the Detailed Method has no specific maximum for deductions.
Eligible employees can claim actual home office expenses deduction,
- If they worked from home in 2020 due to the Covid-19 pandemic.
- If their employer required them to work at home.
- If they were required to pay for their home workspace and if the expenses are work-related.
- If they worked more than 50% of the time in their home workspace for at least four consecutive weeks or use their home workspace to earn employment income.
- If they have obtained the T2200 or T2200S Form from their employer.
Eligible Home Office Expenses
Employees can claim employment tax and benefit return deductions on certain home office expenses – home workspace expenses, office supplies, and certain phone expenses.
Eligible expenses include:
Salaried Employees and Commission Employees
- Utility portion of Condo fees
- Office supplies (envelopes, folders, highlighters, ink cartridges, notebooks, paper clips, pens or pencils, printer paper, stamps, stationery items, etc.)
- Maintenance and minor repairs (cleaning supplies, paint, light bulbs, etc.)
- Home internet access fees
- Rent paid for a house or apartment.
Commission Employees only
- Home insurance
- Property tax
- Lease of cellphone, Laptop, Tablet, Computer, Fax Machine, etc. that relate to earning a commission
Salaried and commission employees cannot claim deductions for:
- Mortgage interest
- Home internet connection fees
- Principal mortgage payments
- Wall decorations
- Capital expenses
- Computer accessories, such as Monitor, Mouse, Speakers, Keyboard, Router, etc.
- Furniture – desk, chairs, etc.
- Cell phone connection or license fees
How to Fill the T2200 Form
The T2200 form is available for download on the CRA website. Employers can download and open the form in PDF, E-text, and other alternate methods.
Who Can Sign the T2200 or T2200s Form?
The CRA accepts electronic signatures (for the 2020 tax year only). The employer is responsible for signing the T2200 or T2200S Form and can designate such responsibility to an authorized person.
Observation for Employers
Under the new CRA guidelines for the 2020 tax year, the employer must complete the T2200 or T2200S Form only if the employee wants to use the Detailed Method to claim home office expenses deduction. Many employers will be faced with whether to issue the T2200 Form to all eligible employees.
Unlike the covid-19 related T2200S form (Declaration of Conditions of Employment for Working at Home Due to Covid-19), employers issue the T2200 to eligible employees who want to claim a deduction for expenses that weren’t fully or partially reimbursed by their employer.
Employers are required to follow the existing T2200 guidelines for employees who usually work from home before the pandemic. Employers can choose to give the T2200 Form (Declaration of Conditions of Employment) to all eligible employees or provide the Form to employees who request it.