Last year, the federal government launched a new (temporary) way to claim Canada’s work from home tax deduction.
It was updated to help support Canadians who have been working from home due to the COVID-19 pandemic, so they could claim money back for essentials like electricity, heating and internet access fees.
Ahead of tax time, Narcity chatted with Gerry Vittoratos, a national tax specialist at UFile, to understand the most important things to know about the deduction before filing.
If you’ve worked from home due to the pandemic in the last year, here’s what you need to know:
What should we know about Canada's work from home tax deduction?
“What people should know is that they have a choice in how to claim their home office expenses under the employment expenses deduction,” Vittoratos told Narcity.
To make things easier for Canadians this year, the government introduced a new temporary “flat rate method” of claiming the work from home tax deduction.
This method has no administrative requirements and offers a maximum of $2 per working day, up to a total of $400.
While it’s definitely easier to apply for and requires a lot less paperwork, Vittoratos urges all Canadians to consider the two options available to claim back their expenses.
“Compute both methods and see which one is more advantageous. Don’t assume that the temporary flat rate method is best because it’s simpler,” he added.
What is the other option?
The other option is to claim using the "detailed method," which is the traditional method used by Canadians working from home to get a tax deduction.
“The major differences between both methods is that under the temporary flat rate method, your deduction is limited to $2 per work day, while under the detailed method, you can claim the amount of specific expenses related to your workspace,” Vittoratos explained.
Additionally, instead of being capped at $400 for the temporary flat rate method, the detailed method’s limit is an individual’s work income.
It can help to cover things like rent, electricity, heating, maintenance (like minor repairs, cleaning supplies, light bulbs and paint), phone bills and internet bills, among other things.
“In order to use the detailed method, your employer has to complete the T2200S form and give you a copy, confirming that you’re required to work from home," said Vittoratos.
"The deduction itself is claimed on the same form as the flat rate method, the T777S form,” he added.
“Temporary flat rate is a lot simpler to calculate, but you have more potential to claim a higher deduction under the detailed method,” the tax specialist confirmed.
What else should we know ahead of tax time?
This year, tax season in Canada is expected to be “incredibly difficult,” thanks in part to the number of Canadians who have claimed COVID-19 benefits over the last year.
Vittoratos explained to Narcity exactly what Canadians who received COVID-19 benefits need to know ahead of tax time, including being prepared to potentially owe money.
He also revealed the one thing tax experts wish all Canadians knew when filing their taxes — which involves getting ready for the season way before you need to!
Finally, for anybody feeling anxious about tax time or getting confused, he reassured us that we’re unlikely to go to jail for getting mixed up when filing.
That said, it’s definitely important to try and file your taxes properly to avoid owing any money and interest.