Canada

How Canadians can get a $400 tax credit — no questions asked — for working from home during COVID-19

While can get some cash back for sitting in your new home office, you can't claim anything for making it more comfortable

Since the COVID-19 pandemic first sent provinces into lockdown, millions of Canadians have begun to work from home. For many, there’s no return to the office in sight.

That means people may be spending more money on hydro and utilities, or that they may have had to upgrade their internet plan to accommodate daily Zoom calls.

The federal government has acknowledged this in its Fall Economic Statement, which was released on Nov. 30, and announced that it would make it easier for Canadians to claim expenses up to $400.

“Millions of Canadians are unexpectedly working from home because of COVID-19. They are turning their bedrooms, basements and kitchens into offices, and taking on increased household expenses to do their jobs,” the Liberal government said in its economic statement.

While Canadians working from home were already entitled to deduct certain office expenses, the government said that the existing rules might be hard to understand, or place an unnecessary administrative burden on employers, so the Canada Revenue Agency will simplify the tax filing process.

“First-time claimants may not be familiar with the rules, and the claim process imposes an administrative burden on employers who are already dealing with the broader impacts of the pandemic and have to fill out additional information for their employees who qualify,” the economic statement says.

“To simplify the process for both taxpayers and businesses, the CRA will allow employees working from home in 2020 due to COVID-19 with modest expenses to claim up to $400, based on the amount of time working from home, without the need to track detailed expenses, and will generally not request that
people provide a signed form from their employers.”

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Previously, employers had to fill out Form T2200, Declaration of Conditions of Employment for staff who wanted to claim expenses. That may still be the case for Canadians who want to claim more than $400.

The government said the CRA will release further details in the coming weeks but, in the meantime, the existing “work-space-in-the-home expenses” credit for salaried employees — as opposed to people who are self-employed — can give some indication of what you will be able to claim on your next tax return.

Under the current rules, you may only claim expenses that will not be reimbursed by your employer and they must be used directly in your work.

The space must be where you do your work more than 50 per cent of the time and must be used only to earn your employment income.

Given that many Canadians have found themselves working out of their bedrooms and kitchens, the government may loosen this criteria.

What may you deduct? Under the existing rules, you may deduct the percentage of your electricity, heating and maintenance costs that apply to your home office.

You cannot deduct mortgage interest, property taxes or home insurance, but if you rent your home, you can deduct a percentage of the rent.

For example, if you are renting a 700-square-foot condo and you are using a den that is about 100 square feet as your home office, then you are using about 14 per cent of your home for work. If you are paying $2,000 per month including utilities, you can claim 14 per cent of that, or $280 per month.

“You can only deduct work space expenses from the income to which the expenses relate and not from any other income,” the government of Canada website notes. “If you cannot deduct all your work space expenses in the year, you can carry forward the expenses.”

The CRA also allows you to deduct the cost of stationery and stamps, but not calculators, desks or filing cabinets, which are considered “capital expenses,” according to turbotax.

So, while you may get some cash back for sitting in your new home office, you can’t claim anything for making it more comfortable.

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