Tax Tip Thursday

This is a new and very straightforward method of getting a small tax deduction. You do not need any documentation! You calculate $2 per day that you worked from home in 2020 up to a maximum of $400. So if you were required to work from March 15 to December 31 in 2020, there are exactly 200 working days left in the year. If you worked every one of them (no sick days or vacation days), then you will be entitled to the full $400. If you took any vacation or sick days, you need to decrease the number of claimed days accordingly.

It’s that easy to get a $400 deduction! If your marginal tax rate is 35%, you will save about $135 in taxes.

Method 2 requires you to have a signed T2200 form, which entitles you to claim the home office expenses. There is a shortened version — the T2200S — but regardless of which you use you still need one of them. For this method, you will be adding up your rent, utilities, maintenance, and repairs, and calculating a percentage of them based on the size of your office as a percentage of your home. So if your expenses (including rent) are $30,000 for the year and you have an office that is 10% of the house, you would have a deduction of $3,000.

So this method requires a little bit more effort, but would result in a $3,000 deduction instead of $400! If your marginal tax rate is $35%, this would save you about $1,000 in taxes.

This is a simple example and may or may not apply to your personal situation. To find out exactly how much you could save with on your taxes with this deduction, come see The Mad Accountant!

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.