In 2020, as offices and workplaces across Canada closed or reduced staffing capacity due to COVID-19, many Canadian workers who normally performed work at their employer’s worksite were suddenly required to work from home, either fully or partially. While this has not always been an easy transition, the silver lining is that such workers may be eligible for an income tax deduction in respect of their work-from-home situation.
During “normal” years, if an employee was required to work from home as a condition of employment, the employee might be eligible to claim a tax deduction in respect of their home office and other related eligible expenses. Employers of such employees were required to fill out Canada Revenue Agency’s (“CRA”) T2200 form attesting to the employee’s conditions of employment requiring the employee to incur certain home office expenses. Employees who wished to claim a tax deduction in respect of working from home would have to retain supporting documentation and calculate the percentage of their home’s area that was allocated to work.
Due to the sharp increase in the number of employees who were required to work from home, the CRA introduced a simplified temporary flat rate method for employees to claim a tax deduction if, due to COVID-19, the employee was required to work from home more than 50% of the time for a period of at least four consecutive weeks in 2020. If an employee satisfies the basic eligibility criteria, the employee can claim a flat rate of $2 per day worked at home to a maximum of $400. There is no need for the employee to retain any supporting documentation or calculate the area of their home, and the employer is not required to fill out any CRA form for the employee.
Employees who claim a deduction based on the temporary flat rate method must fill out a T777s form and attach it to their tax return.
Employees who were required to work from home due to COVID-19, and who may have a claim for a larger deduction, may still claim their actual expenses incurred due to working from home, and will require their employer to fill out a T2200S form, which is a simplified version of the T2200 for employees who worked from home due to COVID-19.
Employees who were required to work from home for reasons unrelated to COVID-19 may still claim a home office expenses deduction as per usual, in which case the employer will be required to fill out a regular T2200.
Further information about eligibility and other requirements for home office tax deductions has been made available by the Government of Canada here.