Updated February 17, 2022.
The Canada Revenue Agency and Revenu Québec are making the home office expense deduction more accessible and simplifying how employees can claim their expenses on their personal tax returns for 2020, 2021 and 2022.
Before the pandemic, for an employee to be able to deduct home office expenses on his personal tax return, this had to be provided for in his employment contract and he had to meet one of the following criteria:
- work more than 50% of the year from home; OR
- use the home office solely for her job, and meet customers and other people for her work on a regular, ongoing basis.
In 2020, 2021 and 2022, to qualify for the simplified method or the relaxed detailed method, the employee must have worked from home more than 50% of the time during a period of at least four consecutive weeks in 2020 due to COVID-19. Days worked full-time as well as part-time from home are eligible. However, days of leave, vacation or illness are not included in the calculation.
Temporary fixed-rate method (simplified method)
This temporary method, for the 2020, 2021 and 2022 tax years, allows employees to simplify the deduction of home office expenses related :
- to the workspace ;
- supplies ;
- telephone charges.
Eligible employees will be able to claim a $2 deduction for each day worked from home during this period. It is also possible to deduct $2 for each additional day of telecommuting. The maximum amount that can be deducted is an annual amount of $400 per person for the year 2020 and an annual amount of $500 per person for the years 2021 and 2022. As a result, if several people telework from the same home, each will be able to claim the $400 or $500 deduction, provided the eligibility criteria are met.
For example, if an employee worked 100% of his or her time from home due to the pandemic during the period from March 15 to April 11, 2020, the employee would qualify for the relaxation. Then, assuming the employee worked from home two days a week from April 12 to the end of September and then worked 4 days a week from October to December 2020 because of COVID-19, the employee will be entitled to a deduction equal to $2 per day of telework for the period from March 15 to December 31, 2020.
With this flat-rate method, there’s no need to keep supporting documents or obtain a declaration of working conditions from their employer (form T2200 at the federal level and TP-64.3 in Quebec). If an employee chooses the temporary fixed-rate method, he or she can only deduct home office expenses ($2 per day) and cannot deduct any other employment expenses. Note that this method is available even if employers have reimbursed part of the home office costs to their employees.
More flexible detailed method
In cases where an employee incurs only home office expenses and has no other expenses, such as vehicle expenses, for example, the employer can complete the federal T2200S form (which is a shortened version of the T2200 form) and the TP-64.3 form in Quebec.
The more flexible detailed method is more advantageous for employees who have incurred significant eligible expenses. For example, expenses for heating, electricity, cleaning products and minor repairs. Whether tenant or owner, the employee can deduct a portion of his expenses on his personal income tax return in proportion to the space used by his office over the total surface area of the residential space.
An employee who rents a dwelling in which his office is located can deduct a reasonable portion of his rent. The employee-owner cannot deduct any of these expenses: mortgage principal and interest payments, property taxes, insurance premiums and depreciation.
Table 1: Summary of home workspace expenses
Eligible home workspace expenses must be calculated based on the size of the workspace in relation to the total area of the home. For example, an employee incurred $10,000 in eligible expenses during the year. The employee uses only one room in his home as an office. This room corresponds to 20% of the surface area of the residence. The employee may claim expenses corresponding to $2,000 ($10,000 * 20%).
If the workspace is not used exclusively for business purposes, an adjustment will also have to be made to account for the time during which the space is used for telecommuting. For example, an employee incurred $10,000 in eligible expenses during the year. The employee works at the kitchen table, as he doesn’t have a dedicated room for working from home. He estimated that the workspace corresponds to 15% of the surface area of the residence. The kitchen serves as his office for 8 hours a day, 5 days a week. The employee can claim expenses corresponding to $357 ($10,000 * 15% * (8h * 5 days) / (24h * 7 days)).
Under the relaxed rules, an adjustment must also be made if the employee has not worked from home throughout the year. Only periods during which the employee worked more than 50% of the time at home are eligible. For example, a person who worked at home due to the pandemic on a full-time basis from March 15 to June 15, and then returned to work at his or her employer’s place of business, can claim only one quarter (3 months /12) of eligible expenses.
Office supplies and telephone costs do not have to be calculated according to the size of the home. However, expenses must be reasonable.
Traditional detailed method
Employees can also use the detailed method based on actual expenses. In such a case, the employee must obtain a declaration of working conditions from their employer (T2200 at the federal level and TP-64.3 in Quebec) and keep the supporting documents. This method is mandatory for employees who have employment expenses other than those related to a home office. One example is automobile expenditure.
A calculator is available on the CRA website to help employees calculate their home office expenses.
