COVID-19 – Tax Savings for Working From Home

 

Working from home during the COVID-19 pandemic has resulted in many of us having higher internet, electricity and heating costs. With the savings from not having to commute to work each day, these additional costs may be easier to manage; however, there is a tax break that could save you money on your 2020 tax return.

In a normal year, you would be required to obtain a signed form from your employer in order to be eligible to deduct home office expenses on your tax return. With the volume of employees requiring these signed forms for 2020, the CRA released some temporary administrative relief measures to make this process easier for both employers and employees.

For 2020, there are two options: the simplified method or the detailed method.

Under the simplified method, in order to qualify you must have worked more than 50% of the time from home for a period of at least four consecutive weeks during 2020. If you met this standard, then you are eligible to claim $2 for each day you worked from home during that four-week period plus any additional days you worked at home in 2020, up to a maximum claim of $400 per individual. If both spouses worked from home in 2020, then each spouse would be eligible for a $400 (maximum) claim. Note that under this method, you are not required to obtain a signed form from your employer, and supporting receipts for your expenses do not have to be retained.

Under the detailed method, in order to qualify you must have worked more than 50% of the time from home for a period of at least four consecutive weeks during 2020 and you must obtain a signed T2200S/T2200 from your employer. You must retain your actual supporting receipts, with the benefit being you can make a claim in excess of the prescribed $2/day and $400/year limits.

 

Eligible home office expenses:

    • Electricity
    • Heat
    • Water
    • Internet
    • Home maintenance
    • Rent
Ineligible home office expenses:

    • Mortgage interest
    • Mortgage principal
    • Furniture
    • Decorations

Which method is best? As always, it depends on your individual circumstances. One factor that may support using the detailed method would be if you rent your home, as you may claim the home office portion of your rent as a deduction.


Guest post by Richmond Economic Advisory Committee Member [email protected].

Raymond James Ltd. is a Member of the Canadian Investor Protection Fund.

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