Working from home – deductible expenses?

Deductible home expenses for an employee

Employer’s certificate required

Before listing the disbursements you intend to claim against your net income, you must first obtain a declaration of working conditions from your employer (T2200 (TP-64.3 in Quebec)). Among other things, this form must certify that the employee was contractually required to use a space in his or her home dedicated to working from home. In this regard, the Canada Revenue Agency (“CRA”) states that if there is no written contract, or if the requirement to incur telecommuting expenses is not clearly specified in the contract, but there is an implied requirement for the employee to incur such expenses, then this test will be met.

50% or more of time devoted to work

In order to deduct expenses for a home office (internet, telephone, electricity, heating, office supplies, etc.), the home must be the main place of work (50% or more of the time devoted to work). Normally, the “50% or more of time devoted to work” criterion is applied for the whole year. The Agence du Revenu du Québec (“ARQ”) has indicated that this condition would have to be met in the current context for the period of work at home without the employee having worked more than 6 months at home in the year. We can expect the CRA to be flexible in its application of this criterion.

Note that if the 50%-plus criterion is not met, certain expenses may still be deductible. In this case, the home office must be used exclusively for work, and for regular on-site meetings with customers or other people related to the job. In COVID times, however, this situation seems unlikely.

Type of eligible expenses

Employees other than commission employees.

Employees who rent or own their own home can deduct a reasonable portion of the cost of heating, electricity, light bulbs, cleaning products and minor repairs.

Employees who rent their office space can also deduct a reasonable portion of the rent. On the other hand, employees who own their own home cannot deduct any of the following: the rental value of their office, capital cost allowance, mortgage interest, property taxes or insurance premiums.

Commission employees

Commissioned employees can deduct more expenses, such as insurance and taxes, as long as they don’t exceed their commission.

Proportion of deductible expenses

Only the proportion of the residence used for home-based work can give rise to deductible employment expenses on the personal tax return.

To calculate the portion of expenses relating to office space in relation to the total surface area of the home, other uses of the space in question must be taken into account (use for personal or commercial purposes, or use for the needs of another job).

For example, if the office space occupies 25% of the surface area of the home and this space is used 80% for the performance of job duties,

• 20% (i.e. 25% x 80%) of supplies consumed in the office space, and ;
• 20% of space rental costs (if home is rented).

Insofar as the office space is used 100% for the performance of job duties, only the limitation relating to the surface area of the home applies (i.e. 25%, in the previous example).

Of course, the compensation obtained from the employer for these expenses reduces the amount of eligible expenses (if the expense is reimbursed by the employer, then it is not deductible by the employee).