Turning Condos into Conference Rooms: Changes to Employee Home Office Deductions Due to the Pandemic

• 
  Keith Trussler
  Lawyer

The COVID-19 pandemic has forced many employees to work from home. As a result, the workspace has transformed from the cubicle into the kitchen counter. In recognition of this shift, the CRA has created new methods for employees to claim deductions for eligible home office expenses that were incurred because of the pandemic in 2020.

These deductions can be claimed in one of two ways, through the simplified method, which gives a flat-rate deduction of up to $400, and through the detailed method, which accounts for the actual eligible home office expenses incurred by an employee. As a deduction, the claimed amount reduces the employee’s taxable income for 2020[1].

The Simplified Home Office Deduction Employees are eligible to claim the flat-rate, simplified deduction if, at any point in 2020, they worked from home at least 50% of the time for a period of at least four consecutive weeks[2]. Qualifying employees can claim a deduction of $2 for each day that they worked from home due to the pandemic, up to a maximum of $400 for the entirety of 2020[3]. Employees who use this method are only required to submit a Form T777S to the CRA[4]. They do not have to keep supporting documents or have their employer fill out any forms.

Employees become ineligible for the flat-rate deduction if they claim any employment expenses besides home office expenses, or if they have been reimbursed for all of their home office expenses by their employer[5].

The Detailed Home Office Deduction

Employees are able to claim the detailed home office deduction for the eligible home office expenses that they actually incurred if:

1. they worked from home more than 50% of the time for at least four consecutive weeks in 2020, or
2. they only used their home office for work, and regularly used it to meet with clients, customers, or other people while working[6].

In order to claim this deduction, employees must complete and submit a Form T777S or T777, and they must receive a completed and signed copy of Form T2200S or T2200 from their employer[7]. While both T2200 forms certify that an employee worked from home and was required to pay for home office expenses, the new Form T2200S specifically relates to the pandemic. Employees who use the detailed method are also required to keep supporting documents for the amounts claimed. The detailed method allows employees to claim deductions for the eligible expenses that they incurred in 2020[8]. Eligible expenses include the work-related portion of phone plans, long-distance calls, and consumable office supplies (such as paper, pens, and printer ink) if the employee was required to pay for them. Employees who work on commission can also claim a deduction for the work-related cost of leasing cell phones and other electronics.

In addition to the above amounts, employees who use the detailed method are able to claim deductions for their “work-space-in-the-home expenses”[9]. An employee’s “work-space-in-the-home expenses” are equal to the lesser of their:

1.  “employment-use amount” (described below), or
2. their income from employment,
   • less any union, professional, or like dues,
   • less any registered pension plan deductions, and
   • less any deductions for office supplies or phone expenses.

The “employment-use amount” is the product of the employee’s eligible expenses multiplied by their “employment-use percentage”. The “employment-use percentage” is based on the percentage of the employee’s home that is occupied by their home office. This percentage is reduced if the home office is also used as a living space, and it is also reduced if multiple people share the same work space[10].  

• heat, electricity, and water,
• monthly internet fees,
• maintenance, cleaning products, and minor repair costs that relate to the entire home, and
• rent paid for the home or apartment.

Employees who work on commission are also entitled to deduct the “employment-use percentage” of home insurance and property taxes.

In addition, maintenance and minor repairs that are only done on the workspace are fully deductible as the “employment-use amount”, without being reduced by the “employment-use percentage”.

The law has changed quickly to keep up with the pandemic. Reach out to our tax experts at McKenzie Lake Lawyers to stay on top of every development.

This article was written by Articling Keenan Fast and Lawyer Keith Trussler.