• Nilgun Uzunhasanoglu

NEW 2020 HOME OFFICE EXPENSES FOR EMPLOYEES

WHAT THE CHANGES ARE?


I. New Temporary Flat Rate Method

The new temporary flat rate method simplifies your claim for home office expenses. You are eligible to use this new method if you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020 due to the COVID-19 pandemic.

You can claim $2 for each day you worked from home during that period plus any additional days you worked at home in 2020 due to the COVID-19 pandemic.

The maximum you can claim using the new temporary flat rate method is $400 (200 working days) per individual.


II. New Options to Claim the Actual Amounts You Paid

You can use the detailed method to claim the home office expenses you paid for the period that you worked from home.


III. New eligible expenses

The CRA has expanded the list of eligible expenses that can be claimed as work-space-in-the-home expenses to include reasonable home internet access fees. A comprehensive list of eligible home office expenses has also been created.


COMPARE THE CLAIM METHODS


For your 2020 tax return, there are two options to claim home expenses for the employees:


Option 1: Temporary flat rate method:

Applies to:

  • eligible employees working from home in 2020 due to the COVID-19 pandemic.

With this method:

  • you can claim $2 for each day you worked from home in 2020 due to the COVID-19 pandemic, up to a maximum of $400

  • your employer is not required to complete and sign Form T2200

  • you are not required to keep documents to support your claim

Option 2: Detailed method

Applies to:

  • eligible employees working from home in 2020 due to the COVID-19 pandemic

  • eligible employees required to work from home

With this method:

  • you can claim the actual amounts you paid, supported by documents

  • you must have a completed and signed Form T2200S / Form T2200 from your employer

WHO CAN APPLY?


Eligibility Criteria For Temporary Flat Rate Method: Each employee working from home who meets the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses.

To use this method to claim the home office expenses you paid, you must meet all of the following conditions:

  • You worked from home in 2020 due to the COVID-19 pandemic

  • You worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020

  • You are only claiming home office expenses and are not claiming any other employment expenses

  • Your employer did not reimburse you for all your home office expenses

Eligibility criteria For Detailed method: To claim the actual expenses you paid for working from your home, you must meet all the following conditions:

  • One of the following applies:

You worked from home in 2020 due to the COVID-19 pandemic

OR

Your employer required you to work from home

  • You were required to pay for expenses related to the workspace in your home


Note: This does not have to be part of your employment contract and may be a written or verbal agreement.


  • One of the following applies:

Your workspace is where you mainly (more than 50% of the time) work for a period of at least four consecutive weeks. The period can be longer than a month.

OR

You only use your workspace to earn employment income. You also have to use it regularly and continually for meeting clients, customers, or other people while doing your work.

  • Your expenses are used directly in your work

  • One of the following applies:

You have a completed and signed copy of Form T2200S, Declaration of Conditions of Employment for Working at Home Due to COVID-19, from your employer

OR

You have a completed and signed copy of Form T2200, Declaration of Conditions of Employment, from your employer


Note: You cannot claim any expenses that were or will be reimbursed by your employer. Keep a copy of Form T2200S or Form T2200, in case we ask to see it.


DETERMINE YOUR WORKSPACE USE


TEMPORARY FLAT RATE METHOD: If you are using the Temporary flat rate method , you do not need to determine the size of your work space to calculate your claim for home office expenses in 2020.

Multiple employees working in the same home: Each employee working from home who meets the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses.


DETAILED METHOD: If you are claiming the employment portion of the actual amounts you paid, use the Detailed method . You will need to determine the size and use (employment and personal) of your workspace to calculate your claim for work-space-in-the-home expenses.

Size of your home and workspace:

Size of your home: All finished areas within the home count towards the size of the home. This includes:

  • hallways

  • bathrooms

  • kitchen

You can measure this in square meters or square feet.


Size of your workspace: The size of the space you work in must be reasonable. You can measure this in square meters or square feet.

Determine the percentage of your home that you use as a workspace:

To determine the percentage of your home that you use as a workspace, use this formula:

Size of your work space ÷ Size of your home ×100 = your work space as a % of your home


Hours per week you use the space for work: The number of hours you use the space for work can affect the amount of expenses you can claim and depends on the type of your workspace: a common (shared) area or designated room.

  • Common (shared) area: Your claim is based on your employment use of the space and is determined using the number of hours the space is used for work.

  • Designated room: Your claim is not affected by the number of hours you use the space for work.

Change of workspace:

If you use different workspaces in your home, or you move to a new property, you will need to claim the expenses you paid for each workspace separately. This is due to changes in the size and type of the work space, or finished area of the home.


EXPENSES YOU CAN CLAIM


FOR TEMPORARY FLAT RATE METHOD: If you are using Temporary flat rate method , you do not need to determine your expenses to calculate your claim for home office expenses in 2020.

The temporary flat rate method is used to claim home office expenses that you paid like rent, electricity and home internet access fees, as well as office supplies like pens and paper, and cell phone minutes.

If you use the temporary flat rate method, you cannot claim any other employment expenses (for example motor vehicle expenses).


FOR DETAILED METHOD: If you are claiming the employment portion of actual amounts you paid, you use the Detailed method to determine the amount of work-space-in-the-home expenses you can claim. You must separate the expenses between your employment use and non-employment (personal) use of your home.

Work-space-in-the-home expenses

If you meet the eligibility criteria, you can claim a portion of certain expenses related to the use of a work space in your home.

Commission employees who sell goods or negotiate contracts (typically have an income amount in box 42 on their T4 slip), can claim some expenses that salaried employees cannot.


Home Expenses Can Be Claimed:

All salaried employees and commission employees can claim:

  • electricity

  • heat

  • water

  • utilities portion (electricity, heat, and water) of your condominium fees

  • home internet access fees

  • maintenance and minor repair costs

  • rent paid for a house or apartment where you live

Commission employees can also claim:

  • home insurance

  • property taxes

  • lease of a cell phone, computer, laptop, tablet, fax machine, etc. that reasonably relate to earning commission income

Home Expenses CANOT Be Claimed:

Salaried employees and commission employees cannot claim:

  • mortgage interest

  • principal mortgage payments

  • home internet connection fees

  • furniture

  • capital expenses (replacing windows, flooring, furnace, etc)

  • wall decorations

HOW TO CLAIM?


This deduction is claimed on your personal income tax return. Deductions reduce the amount of income you pay tax on, so they reduce your overall income tax liability.

FOR TEMPORARY FLAT RATE METHOD: This method simplifies your claim for home office expenses (work-space-in-the-home expenses and office supply and phone expenses). If you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020 due to the COVID-19 pandemic, you can claim $2 for each day you worked from home during that period. You can then also claim any additional days you worked at home in 2020 due to the COVID-19 pandemic. The maximum amount that can be claimed is $400 per individual. This method can only be used for the 2020 tax year.

Steps:

  1. Confirm you are eligible: You must meet the eligibility criteria - Temporary flat rate method to claim your home office expenses.

  2. Fill in the form: Count the total number of days you worked from home in 2020 due to the COVID-19 pandemic and multiply that by $2 per day. This amount will be your claim for 2020 (up to a maximum of $400 per individual).

  3. Claim the deduction on your tax return: Enter the amount from Line 9939 on Form T777S to Line 22900 "Other employment expenses" on your 2020 income tax return. Form T777S must be filed with your tax return.

FOR TEMPORARY DETAILED METHOD: This method allows you to claim the actual amounts you paid, supported by documents. You must complete Form T777S or Form T777 and get a completed and signed Form T2200S or Form T2200 from your employer.

Steps:

  1. Confirm you are eligible: You must meet the eligibility criteria - Detailed method to claim your home office expenses.

  2. Fill in the applicable form: Use the calculator to determine the employment-use amount to enter on Form T777S or Form T777.

  3. Claim the deduction on your tax return: Enter the amount from Line 9368 on Form T777S or Form T777 on Line 22900 "Other employment expenses" on your tax return. Form T777S or Form T777 must be filed with your tax return. Do not include your supporting documents. Form T2200S or Form T2200 is kept by you and is not included with your tax return.

  4. Keep your records: Keep the following records for six years:

  • Declaration of Conditions of Employment (Form T2200S or Form T2200)

  • any receipts, supporting documents and records


Contact us: If you need more information regarding this new tax credit, you can contact us at 647-987-2099 or send email to info@globalabcservices.com to book a free consultation.

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