Home office deduction

Due to COVID-19, many people have been working at home and using their home as their workspace. In response, the Canada Revenue Agency (CRA) has introduced a new temporary flat rate method to simplify claiming the deduction for home office expenses for the 2021 tax year.
There are two ways to claim home office tax deductions.

1. The simplified method
   • If you’re an employee who’s been working at home more than 50 percent of the time over at least four consecutive weeks in 2020 due to COVID-19, you’ll be able to claim a deduction of $2 for every work-from-home day, up to a maximum of $500. This is what the CRA is calling a temporary flat-rate method of calculating the home office deduction.
   • If you use this method, your employer is not required to complete Form T2200S, Declaration of Conditions of Employment for Working at Home Due to COVID-19, and you are not required to keep documents to support your claim.
2. The traditional method
   • If your home office expenses are more than $500 or you have other employment expenses, your employer must sign form T2200, Declaration of Conditions of Employment, or T2200S, which indicates what types of expenses (home office, vehicle, cell expenses, etc.) or form T2200s, which is only for home office expenses.
   • According to the T2200 form, you can claim a reasonable percentage of your home expenses (rent, utilities) and other employment expenses as tax deductions.
   • While using the traditional method, you have to keep documents and receipts to support your claim.

How much you can save in taxes

First, please understand that the employment expenses is tax deduction, not the real dollar you save. Your tax saving = your marginal tax rate x tax deduction.

For example, if your taxable income is $100k, then your marginal tax bracket is 43.41%. By claiming the $500 home office expenses, your tax saving will be 500×43.41% = $217.05

If you choose the traditional method and you have the T2200s form signed by your employer, then you total up your home utilities, maintenance, home insurance (commission employees only), and property tax (commission employees only) and multiple a reasonable percentage. The total is the home office expenses you can deduct.

Example:

Sam is a salaried employee who worked from home using her dining room table in April 2021 due to COVID-19. The dining room represents 12% of the total square footage of her house and is used for work for 40 hours out of a total 168 hours in the week. Sam paid $200 for electricity, heat, water and internet and $1,000 for rent. To determine her employment-use amount, Sam must first determine her employment-use percentage. This is how she will calculate the percentage: (40 hours / 168 hours) x 12% = 2.9%
The home office expenses she can claim is ($200 + $1,000) x 2.9% = $34.80.