Claiming expenses if working from home

Don’t forget this tax break on your 2020 return

In 2020, a large number of taxpayers are working from home due to workplace restrictions imposed by governments due to the COVID-19 pandemic. The current requirements for claiming home office expenses are very strict, and the reporting is rather cumbersome. But CRA is working on a solution.

Under the current rules, home office expenses for an employee are only deductible if they are required by their employment contract, not paid by the employer, and if the employer specifies the details of the agreement on form T2200 Declaration of Conditions of Employment. This form is complex and, as many tax practitioners know, is often completed incorrectly, if at all, by the employer.

Because of the realities of 2020, where many employees are working from home with no change in their employment conditions, changes have to be made, or the employee’s home office costs will not be deductible.

With this in mind, CRA consulted with employers and members of the tax community. At that consultation, they presented a draft T2200 Short form for discussion. This short form was designed specifically for employees working from home during the pandemic.

If adopted, this form would allow employers to attest to a verbal agreement between the employer and the employee that they would work from home and pay their own expenses. The form also stipulates that the employee must have worked from home for more than 50% of the time for a period (or periods) of at least four weeks.

During the consultations, it was suggested that a simpler approach would be to adjust the T4 slip for 2020 to add a tick box to indicate that the employee was required to work from home and another box in the Other Information area to indicate the amount of any reimbursement not included in income.

The T4 slip for 2020 has just been released, but it contains no revisions related to home workspace expenses.

Check Knowledge Bureau for updates and breaking news on federal tax and income support changes.

Walter Harder is Master Instructor at Knowledge Bureau™, a widely respected financial education institute and publisher, which has welcomed thousands of students from the various financial services to its online and in-class programs.

Notes and Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.