The Canada Revenue Agency (CRA) has provided guidance for Canadians who have had to work from home due to the COVID-19 pandemic. Many Canadians who would not normally be entitled to a claim for home office expenses will be able to claim these expenses because they have been working from home in 2021. This is a welcome extension of the program that was started in 2020.
CRA has simplified the way in which employees may claim home office expenses on their personal income tax returns for the 2021 tax year. Employees who worked from home for more than 50% of the time over the period of at least four consecutive weeks in 2021 due to COVID-19 will be eligible to claim home office expenses as a deduction for 2021. Please also note that the simplified options are also available even if you are not required to work from home, but you are given that option by your employer.
There are three methods to claim the tax deduction for working from home. The first two options are outlined on Form T777S which the employee should review when considering their best option.
1. Option 1 – Temporary Flat Rate Method (new)
This method allows eligible employees to claim a deduction of $2 for each day they worked at home in the four-week periods, plus any other days they worked from home in 2021 due to COVID-19 up to a maximum of $500. This represents a maximum of 250 working days at home within a full year. Please also note that you must work more than 50% of the time from home for each period.
Under this method, the employee does not require any form completed or signed by their employer. They would simply calculate the amount and include it in the 2021 personal tax return as a deduction.
2. Option 2 – Detailed Method (new)
For this method, the specific expenses that may be claimed are outlined on Form T777S. In addition, the second page of Form T777S must be completed and all supporting documentation for any expenses incurred must be kept by the employee. Please also note that you cannot claim any expenses that were or will be reimbursed by your employer.
In addition, the employee must obtain Form T2200S from their employer. This form provided an employer declaration that the employee did work from home due to COVID-19, whether the employee was or will be reimbursed for any of their home office expenses and whether those amounts are included in the employee’s T4.
3. Option 3 – Historic Method
Employees who historically claimed home office expenses or other employment expenses may still choose to use the historic forms to calculate their home office expense deduction for the 2021 tax year. This will require the standard Form T2200 Declaration of Conditions of Employment to be obtained from the employer. Should the employee use this method, all supporting documentation for amounts claims must be kept.
Find links to Form T777S, T2200S and T2200 below.