Tax Tip Thursday

We are hot into tax season and one of the things that is coming up already is Home Office Expenses for employees.

For the last couple of years, people were able to claim a “flat rate” amount for the number of days they were working from home. They could also use a “detailed” method to calculate their expenses based on the size of the home office and some of the expenses of the home.

For the 2023 tax year (which we are preparing taxes for now), things have changed, but the employees can still claim the home office expenses, under specific circumstances.

What Changed?

So even if you were not REQUIRED to work from, but were ALLOWED to work from home, under an agreement with your employer, the CRA says you will be able to claim employment expenses on your tax return.

This does NOT need to be in writing; a verbal agreement is sufficient and the employee is considered to have been required to work from home.

The temporary “flat rate” method, which allowed Canadians working from home due to Covid to claim up to $400 in employment expenses in 2020 and up to $500 in 2021 and 2022, is not available for 2023.

The simplified method didn’t require an employee to track expenses or obtain a Form T2200: Declaration of Conditions of Employment.

The CRA has issued an updated T2200 for 2023, a completed and signed copy of which employees need to obtain from their employer to claim employment expenses under the “detailed” method, the only method available for 2023.

Conditions

Under the detailed method, an employee who works from a home office more than 50% of the time for a period of at least four consecutive weeks in a year can claim eligible expenses.
An employee may also be eligible if they only use their home work space to earn employment income and they do so “regularly and continually for in-person meetings with clients, customers, or other people” for work purposes, the CRA indicated.
Eligible expenses include utilities, home internet, rent, maintenance and minor repair costs and certain office supplies, but not mortgage payments. Only commission-based employees can deduct property taxes and home insurance.

Employees must calculate eligible expenses based on the ratio of the size of their home work space to the size of the finished space of their home, and in proportion to the employment use of the space as opposed to personal use.

Employees can NOT claim expenses for which the employer has already paid.

To claim expenses, employees need to file a Form T777: Statement of Employment Expenses and must keep receipts, documents and related records. They do not need to file the T2200 with their return, but need to have one if the CRA asks.

The CRA has updated the T2200 so that employers have to complete only the first six questions in cases where an employee is just claiming home office expenses. The remaining questions relate to travel, vehicle and other expenses.

The T2200S: Declaration of Conditions of Employment for Working at Home Due to COVID-19 isn’t available for 2023.

Self-employed individuals claim expenses under a separate “business-use-of-home” regime.

The CRA has not provided guidance for claiming employment expenses for 2024 or subsequent years, but I would expect it to be roughly the same. If I were an employee, just to be on the safe side, I would try and obtain a letter from my employer, requiring me to work from home. It will make NO difference to the employer, but could save the employee hundreds or even thousands of dollars in taxes.

Claim Your Expenses!

You could save yourself a pretty good chunk of change if you claim your Home Office Expenses. But make sure you do it right to save yourself a headache! Book an appointment now to keep more of your money in your pocket.

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.