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COVID-19: Employment Expenses

As a result of COVID-19, many employees were required to work from home during a portion of 2020. The federal government had announced in the Fall Economic Update in late November that a new simplified method to claim home office expenses would be announced.

 

The Canada Revenue Agency (CRA) announced the details of these changes on December 15th, 2020. For the 2020 year, employees can use either the Temporary Flat Rate Method or the Detailed Method if they were required to work from home.

 

 

Temporary Flat Rate Method

 

This Temporary Flat Rate Method simplifies the claim of your home office expenses. To be eligible for this method, an employee must have worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020.

 

Eligible employees will be able to deduct $2 per day they worked at home during that period. They are not allowed to claim any days off, paid vacation days, statutory holidays, sick leave days, or other absence days. The maximum deduction is $400 (200 days). Therefore, the maximum tax savings (assuming the highest marginal tax rate) is $214 ($400 x 53.5%) for the 2020 year.

 

Employees would claim this deduction on Form T777S when filing their taxes for the 2020 year. Employers would not be required to prepare T2200 or T2200S for any employees using the Temporary Flat Rate Method.

 

 

Detailed Method

 

The traditional Detailed Method has also been changed slightly for the 2020 year. This allows eligible employees to claim amounts greater than allowed under the Temporary Flat Rate Method. To be eligible for detailed method:

 

  • an employee must have worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020;
  • have a signed T2200S from their employer; and
  • have supporting documents which may be requested by the CRA.

 

The following list includes common home office expenses:

 

All Employees
  • rent paid for a house or apartment where you live
  • electricity, water, heat, or the utilities portion of your condominium fees
  • maintenance (minor repairs, cleaning supplies, light bulbs, paint, etc.)
  • home internet access fees
  • office supplies (stationery items, pens, folders, sticky notes, postage, toner, ink cartridge, etc.)
  • employment use of a basic cell phone service plan
  • long distance calls for employment purposes

 

Commission Employees
  • property taxes
  • home insurance
  • lease of a cell phone, computer, laptop, tablet, fax machine, etc. that reasonably relate to earning commission income

 

You cannot claim the following:
  • capital cost allowance
  • mortgage interest
  • principal mortgage payments
  • capital expenses (replacing windows, flooring, furnace, etc.)
  • office equipment (printer, fax machine, briefcase, laptop case or bag, calculator, etc.)
  • monthly basic rate for a landline telephone
  • cell phone connection or license fees
  • purchase of a cell phone, computer, laptop, tablet, fax machine, etc.
  • computer accessories (monitor, mouse, keyboard, headset, microphone, speakers, webcam, router, etc.)
  • other electronics (television, smart speaker, voice assistant, etc.)
  • furniture (desk, chair, etc.)

 

Example 1

Sam is a salaried employee who worked from home using her dining room table in April 2020 due to COVID. The dining room represents 12% of the total square footage of her house and is used for work for 40 hours out of a total 168 hours in the week. To determine her employment-use amount, Sam must first determine her employment-use percentage. This is how she will calculate the percentage: (40 hours / 168 hours) x 12% = 2.9%.

 

Sam paid $200 for electricity, heat, water and internet and $1,000 for rent. She will enter $200 on line 6 and $1,000 on line 10 of the T777S.

 

Her employment-use amount is ($200 + $1,000) x 2.9% = $34.80.  Sam will enter $34.80 on line 12.

 

Example 2

Sam is a salaried employee who worked from home in April 2020 due to COVID, but used a dedicated office in her home.  The office represents 12% of the total square footage of her house.

 

Sam paid $200 for electricity, heat, water and internet and $1,000 for rent.  She will enter $200 on line 6 and $1,000 on line 10 of the T777S.

 

Her employment-use amount is ($200 + $1,000) x 12% = $144.  Sam will enter $144 on line 12.

 

 

Regular Employment Expenses

 

The regular deduction for Employment Expenses is still available for those employees that typically claim the above expenses plus expenses for motor vehicles, tools, etc. Those employees would need to meet those regular conditions, such as being required to pay for these expenses under terms of their employment contract and have a regular T2200 completed by their employers.

 

Most employees that worked at home temporarily due to COVID would not meet these regular requirements.

 

 

Reimbursements by Employer

 

If your employer reimburses you for expenses, such as your cell phone or other costs, the employee is not able to claim Employment Expenses for these amounts.

 

If you employer gave you an allowance to cover expenses while working from home, this allowance should be included in Box 14 of your T4 slip. This would not include any reimbursements under $500 that were made for the purchase of computer or office equipment to work from home.