Tax Tip Thursday

Work From Home Expenses 2021

We are in full-on tax season with a lot of people dealing with the home office expenses again. If you are working from home for your employer as a result of COVID-19, you will be entitled to claim home office expenses. This means that you can potentially claim part of your home as office space for work. This does not affect the principal residency rules or become taxable when you sell your home or have any other negative tax impacts. This is a win-win for the taxpayer! There are 2 methods to claim the deduction.

The Simple Method

To claim this, you do not need a T2200 or T2200s; you can just claim the deduction. It is just how it sounds, very simple. If you worked at least 50% from home for 4 consecutive weeks, you can claim $2 per day for every day that you worked from home for the year up to a maximum of $500. Excluding Stat holidays, there are 252 working days in the year with no vacation, so just be careful what you are claiming. It is uncertain that the CRA is going to audit this, but you never know.

The Detailed Method

To claim this, you do need a T2200 or T2200s completed by your employer. It has no impact on your employer at all. It is just a form that allows you to claim any expenses that you personally incur to do your job on behalf of your employer. In this case, we are using it for home office expenses. It can also apply to your vehicle, cell phone, office supplies, and tools if you were required to purchase them personally do to your job. Contact me to find out how! For the detailed method and to claim the expenses, you will need to have the following information for the calendar year summarized:

  • Square footage of your home office space
  • Square footage of your home (excluding the basement, unless the office is in the basement)
  • All utility bills for the period in question
  • All maintenance and repairs for the ENTIRE property; here are some examples:
    • Flowers, soil, seed, lawn care, salt (winter and for water)
    • Lawn-cutting
    • Snow-shovelling
    • Yard clean-ups
    • Furnace filters, furnace cleaning
    • Fireplace cleaning
    • Repairs (a grey area specific to the situation)
  • Rent
  • House insurance (if you are a commissioned sales rep)
  • Property taxes (if you are a commissioned sales rep)

These will contribute to your home office deduction, as a proportion of the housing expense.  These also apply if you are self-employed.

So the question everyone asks me – which method should I use?

And it makes a difference. We charge 2 different fees depending on which you chose, but one could work out a LOT better than the other. So it is a situationally specific answer. In general, the bigger the office and smaller the house, the better the deduction. Renting can also work out very well in a lot of circumstances. For example:

  • 1000 square-foot rental space
  • 100 square-foot office
  • $24k in rent
  • Your home office deduction will be $2,400 at a minimum

In that circumstance, it is better to claim your home office deduction using the detailed method for a deduction of $2,400 instead of the simple method for a deduction of $500.

A couple of reminders!

  1. If you are a corporation with a December year-end, you need to make sure your taxes are paid by March 31 or there will be interest on the amount owing. If you have made your instalments throughout the year, then you should be fine.
  2. Personal tax returns are due to be filed by May 2 this year, but don’t leave them! We guarantee to file your return on time as long as we have all your stuff by April 7. After that, no promises.

Be sure that the method you use is the right one for your home office by booking an appointment. Make the deadline and don’t delay!

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.