Due to the COVID19 pandemic many businesses have closed their offices and employees are now required to work from home. Many employees have incurred work-space-in-the-home expenses and are asking whether these expenses may be deductible from their employment income for the 2020 tax year.
For the 2020 tax year, there are two methods employees can use to claim their home office expenses: the Temporary Flat Rate Method and the Detailed Method.
Temporary Flat Rate Method
CRA has announced a new temporary flat rate method for claiming work-space-in-the-home expenses. This is a simplified method available for the 2020 year only and does not require supporting documents or a calculation of work space details. You are eligible if you worked more than 50% of the time from home, due to the COVID-19 pandemic, for a period of at least four consecutive weeks. If you meet this condition, you can claim the following:
- $2 for each day worked from home during that period; plus
- $2 for any additional days worked from home outside that period.
The maximum amount you can claim using the new Temporary Flat Rate Method is $400 (200 working days) per individual. Days that can be counted as a work day are any days you worked full-time or part-time hours from home. Sick leave days, vacation days, days off or days relating to another leave or absence do not count as a work day.
The CRA has also created a simplified Form T2200S and Form T777S for those that choose to use the Detailed Method to claim home office expenses. The eligibility requirements are the same as the Temporary Flat Rate Method, however, you must have a completed and signed Form T2200S/Form T2200 from your employer. If using this method, you can claim the actual amounts you paid but they must be supported by documentation.
Details are avaukabke on how to claim expenses under the Detailed Method.
Home internet access fees
Monthly costs for home internet access fees are deductible, but the cost of the plan must be reasonable. Costs relating to connection fees or the portion of fees relating to the lease of a modem/router are not deductible.
Current rules regarding work-space-in-the-home expenses
An employee can deduct work-space-in-the-home expenses if they meet one of the following conditions:
- The work space is where the employee mainly (more than 50% of the time) does their work.
- The employee uses the workspace only to earn their employment income. The employee also has to use it on a regular and continuous basis for meeting clients, customers, or other people in the course of their employment duties.
In order for an employee to deduct work-space-in-the-home expenses the employee must be required to incur these expenses pursuant to the terms of their employment. The requirement to work from home does not need to be in writing and it is expected that employees forced to work from home under the current COVID restrictions will meet this requirement.
Further information is available on how to claim your home office expenses using either the Temporary Flat Rate Method or the Detailed Method.
Dan Roberts, CPA, CA, CPA (Illinois) is partner, U.S. Tax, and Inderpal Grewal, CPA, a manager, Tax at Baker Tilly WM LLP.
This article was originally published on Baker Tilly WM LLP’s site.