Whether it’s full time or on a hybrid basis, working from home provides flexibility as you juggle work and personal responsibilities. For many people, the pandemic has meant some type of work-from-home arrangement for about two years and counting.
Fewer days commuting to the workplace saves both time and hassle, but it’s also a financial benefit in the form of reduced gas and parking expenses, or fewer trips on public transit. Taking advantage of income tax breaks is another way to keep more of your hard-earned money in your pocket.
Starting in the 2020 tax year and extending at least through 2022, the Canada Revenue Agency (CRA) has permitted employees to make certain deductions related to home-office expenses that may result in a lower income tax liability. If you haven’t done so already, it’s time to put those deductions to good use.
How the deduction works
You may qualify for the deduction if working from home was required by your employer as a result of the pandemic, and you worked from home for at least 50% of the time over a minimum period of four weeks. You must choose between two methods to calculate your tax deduction: temporary flat rate or detailed.
Temporary flat-rate method
This is the simpler method as you can make a claim without the need to submit a form signed by your employer. You may claim $2 for each day of remote work, up to a maximum of $400 (i.e., 200 business days) for 2020, or $500 (250 business days) for each of 2021 and 2022. Be sure not to claim any employment expenses on Line 22900 of your income tax return and ensure that your employer does not reimburse you for home-office expenses.
Claim your deduction by submitting a completed Form T777S with your income tax return. There is no need to provide supporting documents, such as receipts for home-office expenses. If your spouse also meets the eligibility criteria, you may both claim the deduction, up to the limit that applies to each of your work-from-home situations.
Detailed method
Use this method if you’ve incurred home-office expenses that are higher than the amount covered by the temporary flat-rate method. Qualifying expenses include (but aren’t limited to) a portion of your rent or condo fees, internet access fees, minor maintenance and repairs, and utility costs for heat, electricity and water. To calculate your claim, divide the square footage of your workspace by your home’s overall square footage. For example, if your workspace is 10% of the home’s square footage, you may deduct 10% of eligible expenses.
This article is a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.
