By Farhana Uddin
Have you teleworked this year? Here are precisely the expenses for which you can claim tax deductions.
What requirements must you meet to claim home office expense deductions?
The Canada Revenue Agency explains that you must have worked more than 50% of the time at home for at least four weeks in a row.
How many deductions can you claim?
The CRA proposes a temporary flat rate method for the 2020 tax year. This rate allows eligible employees to claim a deduction of $2 per day worked from home. (The four weeks is included, but not vacation days, weekends and other leaves. The CRA does allow you to consider partially worked days, such as half days, as full days.)
If you qualify, you can claim a deduction of up to $400. You won’t even have to submit your employer’s tax forms with this method.
You will also need to complete the box “Option 1 – Temporarily fixed rate method” of Form T777S – Statement of employment expenses related to working from home due to COVID-19. You will enter the number of days you worked at home and multiply it by $2. Regardless of the number of days worked from home, the maximum you can claim is $400.
Remember to attach the form to your 2020 tax return after completing it.
How to work from home during the COVID-19 pandemic
What if you want to claim a larger deduction?
If you want to claim more than $400, you need to use the CRA’s exact method.
With the straightforward method, you will have to:
complete a T777 or T777S form
have a T2200 or T2200S form signed by your employer
What is a T2200 or a T2200S?
These are tax forms filled out by your employer that you must submit with your tax return. The records tell the Canada Revenue Agency (CRA) the costs you pay for working from home. If you have to pay for electricity, internet and heating while working from home, the forms must indicate this.
Where can you get a T2200 or T2200S?
Your employer can give you one of these forms. Contact your employer or human resources to ask if they will send you one for 2020. They can tell you if you are eligible for tax deductions for home office expenses.
What if you are self-employed?
Currently, only employees can receive a T2200 form. Self-employed individuals must complete their tax returns as in previous years until further notice from the CRA.
Self-employed? Here’s how to manage your taxes
Now let’s see what you can deduct for 2020 with the exact method.
What expenses can you deduct using the precise method?
Eligible employees (whether salaried or earning commissions) can claim a deduction for a portion of certain home office expenses. These are expenses for the following things:
electricity
heating
water
utilities (condominium)
internet costs at home
home maintenance and minor repairs
rent
Employees earning commissions may additionally claim deductions for the following:
Home Insurance
property taxes
rental of specific devices (smartphones, computers, laptops, fax machines, etc.)
The CRA recommends using its calculator to determine what these expenses are.
What expenses can you not deduct?
According to the CRA, salaried and commission employees cannot claim deductions for these expenses:
mortgage interest
mortgage payments
internet connection fees
furnishing
capital expenditures (replacement of windows, floors, furnace, etc.)
wall decorations
Visit the CRA page on expenses you can deduct to learn more.
Keep your bills and receipts.
Remember to keep invoices or receipts for any expenses you may want to deduct. The CRA may ask you for them one day.
Tax deductions and tax credits: what’s the difference?
The expenses mentioned above are eligible for tax deductions and not tax credits.
What is the difference? A tax credit can directly reduce your tax. For example, a $200 tax credit will make you pay $200 less in tax.
A tax deduction lowers your income and, therefore, the tax payable. How much does it go down? This will depend on your tax bracket. With a federal tax rate of 29%, a $1,000 deduction earns you $290. You could further reduce the provincial tax
