New Simplified Home Office Deduction for 2020 Income Tax Year
With the onset of the COVID-19 crisis in 2020, numerous employers allowed their employees to work from home. It is for this reason that Canada Revenue Agency (CRA) introduced a new temporary flat rate method to simplify the process for claiming a deduction for home office expenses for the 2020 tax year.
This is a personal income tax deduction to be calculated on form T777S (Statement of Employment Expenses for Working at Home due to COVID-19), which then needs to be attached to 2020 income tax return. Only employees that worked more than 50% of the time from home for a period of at least 4 consecutive weeks in 2020 due to COVID-19 pandemic, can claim $2 for each day worked (excluding days off, sick days, statutory holidays, and leaves of absence) from home in 2020 up to a maximum of $400 (i.e., 200 days) per individual.
Each employee working from home who has paid home office expenses directly used in their work (such as rent, utilities, internet, phone, and office supplies) and has not been fully reimbursed by their employer can use the new temporary flat rate method. This means multiple people working from the same home can each make a home office deduction claim. This method can only be used for the 2020 tax year. You do not have to calculate the size of your workspace, keep supporting documents or complete form T2200S (Declaration of Conditions of Employment for Working at Home due to COVID-19) signed by your employer. However, no other employment expenses (such as motor vehicle, property taxes, home insurance, home maintenance) can be claimed on line 22900 of your return if the flat rate method is used. To access the form, visit the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t777s.html .
Alternatively, a detailed method can be used to calculate your home office expenses on Form 777S (to be attached to 2020 income tax return), which requires supporting documents to be kept plus a completed Form T2200S (to be signed by employer and kept with supporting documents for six years). Any expenses that were or will be reimbursed by the employer cannot be claimed. If claiming other employment expenses on line 22900 of your tax return (such as motor vehicle, parking, tools) as well as home office expenses, you need to fill out Forms T777 (Statement of Employment Expenses) and T2200 (Declaration of Conditions of Employment). Form T777 must be filed with your tax return, and Form T2200 is to be kept with supporting documents for six years.
It is up to the employer to determine who is authorized to sign forms T2200S and T2200. The employer must attest to the fact that you were required to work from home and that you have not been reimbursed for any expenses being claimed while working from home. To access these forms, visit the CRA website at https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t2200s/t2200s-20e.pdf
K & E Professional Accounting Associates are here to help to guide you through your income tax returns during a COVID-19 pandemic. To book an appointment to have your income tax done or to have us guide you through your next return, visit our website https://www.keprofessionalaccounting.com/pages/contact-accountants-winnipeg to book an appointment.