Home office expenses for staff working remotely because of the pandemic: Simplified claim process

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Usually, an employee is allowed to claim home office expenses if:

  • The employee is required to pay the expenses under the employment contract.
  • One of the following conditions is met:
    • The employee principally performs the work there (more than 50%).
    • The employee uses the work space exclusively for the purpose of earning income from the office or employment, and uses it on a regular or continuous basis for meeting customers or other persons.
Because of the pandemic, many employees have had to adapt and work from home. So, the governments have sought to make it easier for them to deduct home office expenses. The simplified process is for employees who have worked from home more than 50% of the time for at least four consecutive weeks due to the COVID-19 pandemic and who are not claiming any other employment expenses (e.g. motor vehicle expenses). Employees can claim home office expenses using the temporary flat rate method or the detailed method. 
Worked from home more than 50% of the time for at least four consecutive weeks

The federal government has provided examples of situations meeting this requirement. In one example, an employee working an alternating schedule of three weeks at home and one week at the office is eligible, because she worked from home more than 50% of the time. Paid and unpaid leave cannot be counted. 

Temporary flat rate method

This method is simple because employees can claim $2 for each day worked from home, up to a maximum of $400. Legal holidays, sick days and vacation days cannot be counted. Since most taxpayers used vacation days or were off on legal holidays, they did not reach the 200-day maximum. An accurate count of the days worked is therefore important. Employees don’t need to keep any receipts or have their employers sign any forms. They must file new forms, T777S and TP-59.S-V, with their 2020 tax returns. According to the Canada Revenue Agency (CRA) website, an employee can use this method if the employer has reimbursed some, but not all, of the home office expenses. 

Detailed method

An employee wishing to use this method must keep all receipts and supporting documents. In addition to completing forms T777S and TP-59.S-V, the employee must ask the employer to sign forms T2200S and TP-64.3-V. Employees can claim the following expenses:

  • Heat, electricity, cleaning products, light bulbs and minor repairs.
  • The utilities portion of condominium fees, where applicable.
  • Rent (tenants).
  • Some office supplies, e.g. paper, pencils, ink cartridges, staples, paper clips, envelopes, pens and postage.
  • Home Internet access fees.
  • Long distance telephone calls made for work.
  • Basic mobile phone service plan (must be able to show the minutes or data consumed directly while performing employment duties as well as the cost of the minutes or data).
Commission employees can claim other expenses, such as home insurance and property taxes related to the work space.
 
Employees must calculate home office expenses based on employment use. To determine the portion of the home used as a work space, an employee must calculate the area of this space, then divide it by the total surface area of the home (including all finished areas, like hallways). However, if the work space is shared, the calculation must reflect this. For example, if a couple is sharing an office equally, and the office space makes up 10% of the total finished area of their home, they can each claim 5% of the eligible expenses.
Some employees have worked at their dining room tables or in their bedrooms. In such cases, they need to determine the number of hours those spaces were used for work. In the Canadian government’s example, the dining room is 12% of the total square footage of the house, and the employee uses it for work for 40 hours out of a total 168 hours in the week. The percentage of the home used as a work space would therefore be 2.9% (12%*40/168).

Both governments now allow employees to claim a reasonable portion of their Internet fees. For example, if the work space is 10% of the square footage of the home, then the same percentage of the Internet bill can be used. According to the CRA website, employees cannot claim the portion of the fees related to connection or the lease of a modem/router. 

Any expenses reimbursed by the employer must be deducted from the total home office expenses (e.g. mobile phone or Internet expenses).

Employees can never claim the following expenses:

  • Mortgage interest
  • Capital expenses (replacing windows, flooring, furnace, etc.) 
  • Some office supplies (printer, fax machine, briefcase, laptop bag, laptop, calculator, etc.)
  • Monthly basic landline rate 
  • Purchase of a mobile phone, computer, laptop, tablet, fax machine, etc. 
  • Peripherals (computer monitor, mouse, keyboard, headset, microphone, speakers, webcam, router, etc.) 
  • Furniture (desk, chair, etc.)

Finally, the above should not be confused with another government measure. Exceptionally, CRA and Revenu Québec are allowing an employer to reimburse an employee up to $500 for computer equipment (laptop, printer, etc.) and office equipment (desk, chair, etc.), provided the employee submits receipts to the employer. Any amount over $500 is considered a taxable benefit. The governments consider that, in the context of the COVID-19 pandemic, such purchases mainly benefit the employer, not the employee.

If an employee is not eligible for the simplified process or wishes to claim other employment expenses (automobile), the employer must sign forms T2200 and TP-64.3-V, and the employee must file forms T777 and TP-59-V with their tax returns.  

The federal and provincial government have developed a tool taxpayers can use to calculate their expenses. 

 

Julie Lacoursière, CPA, CGA
Partner, Blain Joyal Charbonneau
Member of the Technical working group on taxation and commodity taxes

 
 

 

 

 

 
 
 
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