Temporary Flat Rate VS Detailed Method
If you were asked to work from home last year as a result of COVID-19, you may be wondering how you should claim a deduction for home office expense on your personal 2020 income tax return.
Canada Revenue Agency (CRA) has simplified the process of claiming working from home expenses for employees this year. You can choose one of two methods presented in this article to claim such deduction: temporary flat rate method or detailed method. Below you can find the eligibility criteria and each method’s description to decide which method serves best your current situation.
Eligibility:
You need to meet all the criteria listed below, if you would like to claim a deduction for working from home expenses, using either method:
- you worked from home more than 50% of the time for a period of at least four consecutive weeks in 2020 due to the COVID-19 pandemic
- the expenses are used directly in your work during that period
- your employer did not reimburse you for all of your home office expenses
- have a completed and signed Form T2200S or Form T2200 from your employer (only applicable if the detailed method is used to complete the claim
Option #1. Temporary Flat Rate Method
The new temporary flat rate method is a simple and easy way to claim a return for your home office expenses. Under this method, you can claim $2 for each day you worked from home during that period plus any additional days you worked at home in 2020 due to the COVID-19 pandemic. The maximum you can claim using the new temporary flat rate method is $400 (200 working days) per individual. In this scenario, you are not required to get a Form T2200 or T2200S from your employer.
Option #2. Detailed Method
You can use the new detailed method to claim the home office expenses you paid for the period that you worked from home due to COVID-19. This method does not specify a maximum amount and employees would be eligible to claim all of the home office expenses they paid while working from home.
To claim the home office expense using the new detailed method, you will need to receive a signed Form T2200S (simplified form) or Form T2200 from your employer and prepare supporting documents for all of the expenses claimed for the period.
CRA provides a detailed description of Form T2200S and its purpose: “Form T2200S, Declaration of Conditions of Employment for Working at Home During COVID-19, is a shorter version of Form T2200 that you get your employer to complete and sign if you worked from home in 2020 due to the COVID-19 pandemic and are not using the temporary flat rate method. Your employer completes and signs this form to certify that you worked from home in 2020 due to COVID-19 and had to pay your own home office expenses.”
How to calculate your home office expenses?
You can claim home office expenses as well as office supplies. However, the expenses for employment use must be segregated from the expenses you had for personal use. You will need to complete Form T777S, Statement of Employment Expenses for Working at Home Due to COVID-19, in order to determine home office expense amount.
Eligible expenses include:
- electricity
- heat
- water
- utilities portion (electricity, heat, and water) of your condominium fees
- home internet access fees
- maintenance and minor repair costs
- rent paid for a house or apartment where you live
Non-eligible expenses include:
- mortgage interest
- principal mortgage payments
- home internet connection fees
- furniture
- capital expenses (replacing windows, flooring, furnace, etc)
- wall decorations
You can find all the forms necessary for your claim as well as the calculator on the CRA website.
When selecting the deduction method, you should consider multiple factors: whether you are a homeowner or you rent your place, what is the size of your home office compared to your entire house square footage, and the number of days you actually worked from home. Should you have questions regarding your particular situation or require help with T777S calculations, Triple M professionals will be happy to assist you.
References:
CRA News “Simplifying the process for claiming a deduction for home office expenses for employees working from home due to COVID-19”, December 15, 2020
https://www.canada.ca/en/revenue-agency/news/2020/12/simplifying-the-process-for-claiming-a-deduction-for-home-office-expenses-for-employees-working-from-home-due-to-covid-19.html
CPA Canada Tax News “Home office expense claims: how the new rules work”, February 9, 2021
https://www.cpacanada.ca/en/news/canada/2021-02-09-home-office-expense-claims
