2020 was an eventful year. Now that it’s over, and the dust is settling over a massively disrupted workforce, it’s time to look to the future.
And part of that future in the very near term means filing our personal income taxes.
When COVID kicked off, many people had questions over what this new “work from home” scenario meant for them. The method for claiming home office expenses was to have your employer fill out a T2200 form, which you could then use to claim tax deductions.
But therein lies a very big issue.
Many employers simply refused to fill out these forms, effectively stranding their entire workforce with potentially eligible tax deductions that they weren’t able to claim.
Fortunately, late 2020 the CRA recognized the enormous burden of filing out T2200 forms for an entire workforce, and has since offered a simplified approach - one that makes your life easier come tax-time.
Do You Qualify?
The CRA has loosened the restrictions surrounding who qualifies for the home office deductions. Now, the bar to qualify simply states:
You worked from home more than 50% of the time for at least 4 consecutive weeks (one month).
What Can You Claim?
In the simplified approach, the CRA has created 2 new forms, a simplified T2200, which goes under T2200s (form located here). This simplified form must still be completed by the employer, although the complexity of the form is greatly reduced.
The T2200s form indicates whether you, as the employee, were required to work from home for part of your working year. Filing a T2200, or T2200s, is required if you are planning on expensing specific items, such as office supplies or utilities. These specific expenses must be identifiable with receipts, and are claimed using option 2 of the new T777s form (located here).
The other option for claiming the a tax deduction also avoids the use of the T2200s form, and doesn’t require input from your employer. Still using form T777s, you can elect option 1, whereby you are able to claim a flat rate of $2 / day, for every day worked from home during 2020. The maximum claim under this calculation is $400, or 200 working days.
Note: this is still subject to qualifying for the deduction, meaning you worked from home for more than 50% of the time for 4 consecutive weeks.
For illustrative purposes, assume the following is accurate: I worked from home on the kitchen counter for the entire month of May 2020 (4 weeks).
The kitchen where I worked accounts for 100 sq ft of the 700 sq ft apartment. My share of the rent was $1,000 for the month, and internet was another $100/month. And, I worked 40 hours a week, out of a total of 168 hours (7 days * 24 hours each day).
For the month of May, I would be eligible to claim:
(100 sq ft / 700 sq ft)*(40 hours / 168 hours) * $1,100 = $37.41 total deductions
This manner of calculating involves some measurements of the space, as well as some reasonable assumptions. Living in a one bedroom apartment, the kitchen takes up over 50% of the total unit size. But, it’s not a reasonable assumption to include that entire area for my “home office” space.
But that’s not the end of this story.
Upon asking, my employer refused to complete a T2200 form for me. As such, I instead must use the simplified method on T777s. This calculation allows me $2 / day, for every day in the same period. Those same 4 weeks have 20 working days.
Under the simplified method, my eligible tax deduction would be 20 days * $2 = $40 total deductions. Not only that, but I also don’t need to save receipts and employer signed forms to support a claim this way.
Not sure which type of forms to use? The CRA has a handy calculator here that will help you make that determination.
Be sure to check out the forms and calculator early. If you need to have T2200 or T2200s forms completed by your employer, allowing yourself and your employer extra time to process is beneficial.
Just to prove there’s a silver-lining in every challenge, the CRA has made it easier to qualify and claim tax credits for the 2020 calendar year. The right information, and some early planning might leave you just a little bit better off come tax time.