For many, our homes became our offices over the past few years. So it only made sense that the Canadian government made changes to the tax policy regarding home office expenses for employees amid the global pandemic. A new, temporary flat rate method was introduced to make it easier for employees to claim home office expenses.
Find out exactly what the temporary flat rate method is and how you could use it to lower your tax burden.
What is the temporary flat rate method?
Starting in 2020, the temporary flat rate method allows employees working from their home offices to claim a flat rate of $2 each day, up to $400 (for 200 days) on their tax return.
As COVID-19 continued, the government expanded the policy for 2021. So you can now claim up to 250 days of working-from-home expenses. That’s a total of $500 that you could claim on your taxes, which would lower your tax burden.
There’s also no need for employees to fill out a lot of paperwork. Simply claim the $2 per day (up to 250 days) worked from home on your 2021 tax form.
For some quick math: If you worked from home for 175 days during 2021, for example, you would be able to claim $350 of home office expenses with the temporary flat rate method.
How do you know if you’re eligible?
The temporary flat rate method is only available to employees that meet all of the following criteria:
- You worked from home in 2020, 2021, or 2022 due to the COVID-19 pandemic. This includes employees that were allowed to choose whether or not to work from home due to COVID-19.
- You worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020, 2021, or 2022. This includes part-time employees and those who went back to the office and then worked from home later.
- You’re not claiming any additional employment expenses on line 22900 of your tax return.
- You were not reimbursed by your employer for all of your home office expenses. If your employer paid for some of your office expenses, you could still qualify for the temporary flat method.
How do you claim the temporary flat rate method?
The temporary flat rate method for home office expenses is claimed on your personal tax return.
First, you would need to count the number of days you worked from home due to the COVID-19 pandemic. You would then multiply that number by $2. Remember, there’s a maximum amount of $400 and $500 for the 2020 and 2021 tax years.
When filing your taxes, on “Form T777S—Statement of Employment Expenses for Working at Home Due to COVID-19,” you’d enter your amounts. You would then take the amount from line 9939 on Form T777S and input it on line 22900, called Other employment expenses, on your income tax return.
If you’re using tax software, all the information will be populated for you after you provide the number of days you worked from home.
What if my expenses are more detailed?
The temporary flat rate method is convenient for employees who worked from home due to the COVID-19 pandemic because the amount you can claim is capped. If you have additional work from home expenses that exceed the $500 total limit, it may be worth it to use the detailed method.
Under the detailed method, you could claim the following home office expenses:
- Utilities related to your home office space, such as electricity.
- Wireless and internet charges related to your home office space.
- Maintenance and strata fees.
- Rent paid for the portion of your home office space.
- Minor repair costs.
To be eligible for the detailed method, you must meet all of the following conditions:
- You worked from home in 2020, 2021, or 2022 due to the COVID-19 pandemic.
- Your employer requires you to pay for any work-related expenses.
- Your expenses are directly related to your work.
- Your workspace is used more than 50% of the time for at least four consecutive weeks in the year.
- You have a signed copy of “Form T2200S—Declaration of Conditions of Employment,” from your employer or T2200.
When filing your taxes with the detailed method, you would need to complete Form T777S or Form T777. The amount found on line 9368 on Form T777S or Form T777 on line 22900, “Other employment expenses”
You don’t need to include Form T2200S or Form T2200 with your tax return, but you should keep it in your records for about six years in case the CRA needs to validate your eligibility.
When filing your taxes, it’s recommended to use software as it can help you find other tax credits that you may be eligible for. If you would like some guidance with the process, seek out the services of a tax preparer or accountant.