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CRA simplifies home office expense deduction method for 2020

Tuesday, February 09, 2021 @ 3:07 PM | By Kurt Wintermute and Nicholas Horlick


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Kurt Wintermute
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Nicholas Horlick
The COVID-19 pandemic has meant many Canadians are adapting to remote work. In an effort to recognize this large-scale change, Canada Revenue Agency (CRA) has temporarily altered and simplified the eligibility requirements for deducting home office expenses for employees working from home due to COVID-19 in 2020. Previously, CRA’s deductibility requirements for employees working from home were much more restrictive than the new temporary rules which will apply for the 2020 tax year.

Temporary flat rate method for deducting home office expenses

CRA has listed the following conditions that must be satisfied to claim a deduction for home office expenses paid:

  • You must have worked from home in 2020 due to the COVID-19 pandemic (either by choice or because your employer required you to work from home);
  • You worked more than 50 per cent of the time from home for a period of at least four consecutive weeks in 2020;
  • You are not claiming employment expenses other than home office expenses; and
  • Your employer did not reimburse you for all of your home office expenses (if you received a partial reimbursement, you are not excluded).

According to CRA, a day where you worked either full-time or part-time hours will count as a work day, but days off, vacation days, sick leave days or other leaves or absences do not qualify.

CRA has also indicated that multiple employees working in the same home can qualify, as long as each employee meets the above criteria.

Unlike under the detailed method for calculating home office expenses, employees do not need to determine the size of their work space or track expenses to calculate their claim. Instead, the amount of the claim is a temporary flat rate of $2 for each day an employee worked from home in 2020 due to the COVID-19 pandemic, but no more than a maximum of $400 for home office expenses.

CRA currently states that the temporary flat rate method will only be available for the 2020 tax year.

Conclusion

CRA has temporarily relaxed its requirements for employees hoping to claim a deduction on their 2020 tax returns for work at home. Presently, these rules only apply to the 2020 tax year, but we hope to see clarification from CRA about whether they will be extended to other tax years as well.

The new temporary flat rate method is much simpler than the ordinary home office expense deduction rules. The ordinary rules require office space in the home to be used for the employee’s work more than half the time, or to be used only for meeting clients, customers or others on a regular and continuous basis in the course of employment duties and require the employee’s employer to prepare and sign a T2200 Declaration of Conditions of Employment to specify the types of expenses that must be incurred as a condition of employment. 

However, we note that CRA has also made improvements to the ordinary home office expense deduction rules in order to account for the impact of COVID-19. For the 2020 tax year, employers can complete a simpler form, the Form T2200S, for use in respect of employees who are still choosing the detailed method to calculate home office expenses (as opposed to the temporary flat rate method described above). The list of expenses eligible under the detailed method has been expanded by CRA to include home Internet expenses.

Authors’ note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.

Kurt Wintermute is the senior tax litigator and head of the MLT Aikins LLP tax litigation practice area. He has extensive experience representing corporate and individual clients before all levels of court and taxation agencies regarding federal and provincial tax issues. Nicholas Horlick is an associate lawyer and member of the MLT Aikins tax litigation team. He assists individuals and businesses with taxation issues in a variety of contexts, including federal income tax, GST, provincial sales tax, tax-driven bankruptcy and property tax assessment. These articles were prepared with the assistance of MLT Aikins summer student Danielle Hopkins.

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