As Canadian enter the tax season, an Okotoks accountant says there could be opportunity for those mandated to work from home to recoup some costs.
The Government of Canada has developed a new form, the T2200S, an extension of the standard T2200, which is the Declaration of Conditions of Employment form that allows people to claim expenses as indicated in employment contracts, such as travel.
“They have developed a new one this year called the T2200S, which allows people who have been required or find themselves working from home because of the COVID restrictions to claim some of their house expenses that normally they would not be able to claim,” said Michael Kuntz, owner of Cornerstone Chartered Professional Accountants.
The form must be completed by an employer in order for a person to claim the work-from-home expenses on their 2020 taxes, he said. There is a limit to the expenses that may be claimed, and two ways to calculate the claim – a detailed calculation based on the square-footage of the home and all costs allocated to the work area, or a temporary flat rate method of $2 per day.
Employees may own or rent their home, but must be able to prove the expenses are paid out of their own pocket, he said.
“For example, if you were someone still living at home and your parents are paying all the bills, it’s questionable about whether you could actually claim them,” said Kuntz.
He said there are also some strict parameters and limits to the work-from-home claims.
According to the Canada Revenue Agency website, to claim via the temporary flat-rate method the employee must have worked from home in 2020 due to the pandemic, more than 50 per cent of the time and for at least four consecutive weeks in the year. They may only claim home office expenses and not other employment-related expenses incurred, and may not have been reimbursed by their employer for work-from-home costs.
Employees may have been mandated to work from home or chosen to do so due to the COVID-19 pandemic.
By this method, a person can claim a deduction of $2 per day worked from home, to a maximum of $400. Full-time and part-time days may be claimed, but not paid vacation, sickness, or personal days.
Under the detailed calculation method, employees are able to claim the actual home office expenses. While the rules around this calculation have been simplified in 2020, they are essentially the same parameters used by those who work from home regularly.
The calculation is based on a total of eligible overall expenses, pro-rated based on the portion of the home used for work. This requires the employee to determine the square-footage of the home used for workspace – when a common area such as a kitchen table was used, the proration must account for floor space used for employment purposes and time spent in the space.
Eligible expenses must be separated between employment use and personal use, and include electricity, heat, water, utilities, home Internet, maintenance and repairs, and rent. Ineligible expenses include mortgage interest, principal mortgage payments, furniture, and capital expenses.
All expenses are then prorated to the actual percentage of the home space used for employment to calculate the claim amount.
The T2200S form does not need to be included with the tax return, but Kuntz recommends having it at the ready.
“You have to have it on-hand to be able to provide it should it be requested by the CRA,” said Kuntz. “So I would make sure you had that, if at all possible, prior to filing your tax return.”
Kuntz said anyone who received government assistance through the pandemic, such as payments through the Canadian Emergency Response Benefit (CERB), must claim those amounts as taxable income.
“The government will be issuing a tax slip to those individuals to allow them to know what to report on their personal returns,” he said.
He said other things to keep in mind are the additional contribution to Tax Free Savings Accounts that came into effect in January, and the RRSP contribution deadline of March 1.