Home office expenses and the pandemic

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Home office expenses and the pandemic

by UFile Team Équipe ImpôtExpert | Jan 27, 2021   Comments:

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The COVID-19 pandemic has fundamentally changed the way people work. Gone are the office cubicles, now replaced by bedrooms and kitchen tables. What can you claim on your income tax return regarding your home office? Read on…

The flat rate deduction

In late December, the federal government introduced a simplified process for claiming home office expenses: the temporary flat rate method.

You are eligible to use this new method if you worked from home more than 50% of the time for a period of at least four consecutive weeks in 2020 due to COVID-19. You can claim $2 for each day that you worked from home during that period, plus any additional days you worked from home in 2020 due to COVID-19, up to a maximum of $400.

You can claim this deduction through the T777S form.

Can I claim my actual home office expenses instead?

Yes, you can choose between the temporary flat rate method above, and what the CRA now calls the detailed method. Use whichever one is more beneficial to you.

Under the detailed method, eligible expenses include rent, electricity, heating, maintenance (minor repairs, cleaning supplies, light bulbs, paint, etc.), long-distance phone charges, property taxes, and home insurance. However, expenses related to ownership of a house such as home insurance and property taxes are deductible for commission income employees only.

The eligible expenses above are prorated based on your work space use. This use is calculated as a percentage, as follows:

 [size of your work space] ÷ [size of your home] X 100 = your work space as a % of your home

Use the above formula if you work in a room designated exclusively for your work. If your work space is in a common area (i.e. a space that has other purposes besides your work, such as the kitchen, for example), you have to prorate further based on your hours worked:

[your work space as a % of your home (result of the first formula above)] X [(hours worked ÷ total hours in a week) X 100] = percentage of the home that is used as a work space

Here’s an example to understand the math:

Maria is required to work from home due to the COVID-19 pandemic. She works from her dining room, which represents 10% of her home space (result of the first formula). The percentage of Maria’s home that she uses as a work space is calculated as follows:

work space as a % of the home (result of the first formula)

10%

(40 hours worked ÷ 168 total hours in a week) X 100

X

23.8%

percentage of the home used as a work space

=

2.38%

Unfortunately, certain expenses are not deductible such as mortgage interest, capital cost allowance (depreciation), capital expenses (replacing windows, flooring, furnace, etc.), office equipment, furniture, cell phone connection or license fees and purchase, computer accessories (monitor, mouse, keyboard, headset, etc.)

In order to use the detailed method, your employer has to complete the T2200S form and give you a copy, thereby confirming that you are required to work from home. The deduction itself is claimed on the same form as with the flat rate method, the T777S form.