There are many benefits to working from home, but if it’s an arrangement that you are not used to, there are some aspects of this lifestyle that can be complicated. For example, while you may know that working from home makes you eligible for certain tax deductions, it can be difficult to know exactly which ones apply to you.
At Geneva CPA Corp, we can help you navigate your employment expenses and sort out which ones may be subject to tax deductions. Here is an overview of the most important considerations you should have when determining the effect that working from home has on your tax bottom line.
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Are You Eligible for Work From Home Tax Deductions?
Before you start evaluating which deductions you would like to apply for, it is important to first determine whether or not your work-from-home space truly makes you eligible for these considerations. According to the Canada Revenue Agency, in order to be eligible for tax deductions, you have to satisfy certain requirements, such as:
- Employees must be contractually responsible for expenses not covered or reimbursed by their employer
- Both the employer and employee must complete a T2200, Declarations of Conditions of Employment form
- The employee’s workspace should be the place where at least 50% of the employee’s work is done
- The employee’s space must be exclusively used to earn employment basis and on a regular and ongoing basis for meeting customers or other clients in the course of performing employment duties (the CRA has said to date that teleconferences such as Zoom meetings do not count — though this may be subject to change given the current context)
Things You Can Deduct
Please note that while these listed items may be theoretically deducted, your personal deductions will depend on your unique situation. Your accountant can help you understand which deductions are the most applicable to you.
- Heat and electricity bills
- Light bulbs and other maintenance costs
- A portion of your rent
- Certain cleaning materials
Things You Can’t Deduct
The CRA has set out certain expenses that cannot be deducted by employees who work from home. These include:
- Mortgage interest and capital cost allowance
- Office desks and chairs
This last exclusion may come as a surprise to many — and the reason behind this is complicated. It’s not that office furniture isn’t deductible, it’s just that there must be contractual proof that the employee is responsible for these expenses, and that these expenses are crucial to an employee doing their job. This often means that an employer must have signed a T2200 Declarations of Conditions of Employment form, which some employers may be hesitant to do due to administrative costs among other considerations.
I Work From Home Part-Time: Am I Eligible for Tax Deductions?
Yes and no. The CRA clearly sets out that your employee duties must be orchestrated from home for more than half of the time. While this could be interpreted as meaning you do not necessarily have to be a full-time employee, you need to at least spend the majority of your time working from home.
Important Note Regarding the COVID-19 Pandemic
It is important to note that if you are working from home exclusively as a result of the COVID-19 pandemic, you may not necessarily meet the requirements to qualify for the aforementioned tax deductions. The reason for this is that it is not currently clear whether or not your work-from-home space must be permanent, which would mean that the temporary context of the COVID-19 pandemic may not be enough to qualify many workers. At the current time, Canadian accountants are waiting on direction from the CRA in order to best advise their clients.
Of course, the thousands of Canadians who have been forced into a work-from-home situation are anxious to discover whether or not the expenses they have incurred can be eligible for government tax deductions. This is especially true for individuals who were not at all prepared to work from home and had to invest in a brand new office space.
As we await direction from the CRA, it is advisable to keep clear records of any work-related expense that you have incurred since the start of 2020. This way, if the time comes that the CRA announces new guidelines for tax deductions in this exceptional year, you will be prepared. Please contact us if you need to apply or any question about the new coming tax question, Genesa CPA is here to help!