Due to the COVID-19 pandemic, many employees have been working from home, leading to speculation about whether they can deduct home office expenses on their personal income tax returns. In response, the Canada Revenue Agency (CRA) expanded the deduction for home expenses to more employees throughout the nation and provided a simplified method to make the deduction. Included with this new policy change is the introduction of the temporary flat rate method, which allows eligible employees to claim the deduction for home office expenses without having to do some of the cumbersome work that is usually required for the deduction. If you are unsure of how to claim your home office expenses deduction or if you qualify, consider contacting Jeremy Scott Law by calling (902) 403-7201.
What Is the Temporary Flat Rate Method?
The CRA introduced the temporary flat rate method in 2021. It was extended to the 2021 and 2022 tax years. The temporary flat rate method simplifies claims for home office expense deductions. It provides a simplified way for employees who were affected by COVID-19 and had to work from home to claim the home office deduction.
Eligible employees can use the method to calculate their home office expense deduction. The deduction can only be used for one job per person. Those who take advantage of the method cannot make a claim for any other employment expenses.
Who Can Use the Temporary Flat Rate Method?
According to the Canada Revenue Agency, workers who meet the following eligibility criteria can use the temporary flat rate method:
- They worked from home in the years 2020, 2021, or 2022 because of the pandemic, including if their employer gave them the option of working from home because of the pandemic but did not require it
- They worked from home more than half of the time for at least four weeks in a row during the year they are claiming
- They are not requesting deductions for any additional expenses related to employment other than the home office expenses
- Their employer did not pay them back for all of their home office expenses
You must meet all of the criteria to use the temporary flat rate method.
Benefits of the Temporary Flat Rate Method
The temporary flat rate method provides a simplified process for employees to calculate their home office expense deduction. When employees use this method, they do not have to:
- Calculate the size of their workspace
- Track expenses
- Keep receipts or other supporting documents
- Obtain Form T2200 or T2200s from their employer as proof they were required to work from home as a condition of their employment
How Does the Temporary Flat Rate Method Work?
Eligible employees calculate the home office expense deduction by multiplying $2 for each day they actually worked out of their home during the tax year because of COVID-19, up to a maximum of 250 work days or $500. Workers do not count:
- Days off
- Sick leave days
- Vacation days
- Leave of absence
If more than one person in the household is working from home, each person can use the temporary flat rate method and make an individual claim for this deduction.
Detailed Method
Prior to the introduction of the temporary flat rate method, employees would use the detailed method. This method considered the actual home office expenses they incurred and helped to calculate a deduction. Eligibility has expanded for this method due to the COVID-19 pandemic for tax years 2020 through 2022.
The detailed method claims a portion of the expenses for a home office that the employee paid for when they worked from home. Employees who use this method may receive a higher deduction, but they must keep detailed receipts, documents, and records. They must also obtain Form T2200 or T2200s. Eligible expenses typically include:
- Rent
- Utilities or the utility portion of condo fees
- Maintenance
- Basic cell phone service plan fees
- Office supplies
Commission employees can also claim expenses for:
- Home insurance
- Property taxes
- Lease of office equipment, such as a cell phone, laptop, computer, tablet, or fax machine
To use the detailed method, employees:
- Must have worked from home during the tax year because of the COVID-19 pandemic
- Must have been obligated by their employer to pay for expenses related to their home workspace
- Must have used their home workspace more than 50% of the time for at least four weeks in a row
- Must have directly incurred expenses because of their work
Employees are responsible for obtaining necessary documentation from their employers to establish they meet eligibility criteria. CRA is currently accepting an electronic signature on Forms T2200 and T2200S. Employees who are only claiming the home office expenses deduction and no other expenses related to their employment can use a new simplified Form T777S. Employees who want to claim other employment expenses like motor vehicle expenses and the home office expenses use Form T777.
A tax lawyer from Jeremy Scott Law can review your situation and advise whether you should use the temporary flat rate method or detailed method.
New Eligible Expenses
When the change for the temporary flat rate method was made, the CRA also expanded the list of eligible expenses employees could claim for home internet access fees and office supplies. It released guidance on eligibility. The following office supplies are eligible to claim under the detailed method:
- Binder clips
- Envelopes
- Folders
- Highlighters
- Ink cartridges and toner
- Notebooks
- Paper clips
- Pencils
- Pens
- Postage
- Printer paper and specialty paper like graph paper or tracing paper
- Stamps Stationery
- Sticky notes
Commissioned employees can also claim the following office expenses:
- Lease for a computer, laptop, or tablet
- Lease for a fax machine
These expenses are in addition to other expenses you could claim, such as rent and utilities. The CRA also provides information about certain expenses you cannot claim.
Contact Jeremy Scott Law for Help
If you are considering using the temporary flat rate method or would like advice on which method you should use for your home office expenses, consider contacting a knowledgeable tax lawyer for help. Jeremy Scott Law provides a confidential consultation to discuss your unique situation. You can arrange your consultation by calling (902) 403-7201.
