If you’ve been working from your bedroom, kitchen table or couch over the last year, you could be eligible for the government’s new work from home tax deduction in Canada.
It was opened up to millions of people ahead of tax time in 2021, to give money back to Canadians who’ve been working from home due to the COVID-19 pandemic.
Now, the Canada Revenue Agency (CRA) has answered Canadians’ most frequently asked questions about the home office expenses deduction.
Here’s what you need to know:
Who is eligible for it and what are the methods?
There are two different types of eligibility criteria to claim Canada's work from home tax deduction, depending on an individual’s circumstances.
Canadians who want to claim through the “flat rate method” must have worked from home for over 50% of the time for at least four consecutive weeks in 2020.
They can get a flat rate of $2 for each day worked at home during the 2020 tax year, up to a maximum of $400.
The applicant’s employer must not be covering all of their home office expenses and they cannot be claiming any other employment expenses.
Those claiming via the "detailed method” must also have worked from home during 2020 and have been required to pay for expenses related to their work space at home.
People using this method can claim back more than the flat-rate of $2 per day but will have to provide more detailed paperwork.
What types of expenses are covered?
The temporary flat rate method is used to claim general home office expenses that an employee is likely to incur.
This includes things like rent, electricity and internet access fees, in addition to office supplies like pens and paper, and even cell phone minutes.
However, Canadians can’t claim other work expenses (like vehicle costs) via this method.
If an individual’s personal expenses equate to more than $2 per day, or if they have more complex expenses to claim for, the detailed method will help to get a more accurate deduction.
Is it a deduction or a credit?
Put simply, it’s a deduction.
Home office expenses claimed via the CRA are a deduction on a personal income tax return.
This means it reduces the overall amount of income an individual will pay tax on, so it reduces their tax liability and ultimately saves them some money.
What if I chose to work from home?
Providing a claimant meets the rest of the CRA’s eligibility criteria, this is fine.
The deduction is approved regardless of whether an employer required staff to work from home, or whether a person chose to do it for their own reasons.
“If you were not required to work from home, but your employer provided you with the choice to work at home because of the COVID-19 pandemic, then the CRA will consider you to have worked from home due to COVID-19,” the agency confirmed.
Can multiple people from one household claim separately?
Yes. The temporary flat rate method is calculated individually, not by household.
This means if there are multiple people in your home working, each can claim the deduction separately (providing everybody claiming meets the eligibility criteria).
Individuals can also claim the $2 per day if they don’t work a full day at home, or if they worked a day of overtime.
How does my employer come into it?
If an employer has reimbursed some (not all) of a worker’s home office expenses, eligible people can still use the temporary flat rate method.
The same applies for those claiming via the detailed method, but expenses that have already been reimbursed by the employer cannot be claimed again.