Under the Income Tax Act, an employee who is required to pay for employment expenses, including expenses for a home office, for which they are not reimbursed by their employer, may be able to claim a deduction on their return for such expenses.
For a valid claim, Canada Revenue Agency (CRA) form T2200, Declaration of Conditions of Employment, should be completed by the employee and employer in order to claim these expenses. These expenses are entered as a deduction from income on line 22900 (line 229 prior to 2019) of the personal income tax return. The employee will only be able to deducted the expenses that the employer required them to pay, and not all expenses will be deductible. CRA form T777, Statement of Employment Expenses, is used to calculate the amount of the work-space-in-home expenses allowed. The work-space-in-home expenses can only be used to reduce employment income. They cannot be used to create or increase a loss from employment income. Any expenses in excess of the employment income can be carried forward to be used in the next tax year.
On December 15, 2020, CRA announced a Temporary flat rate method for claiming the home office expenses (work-space-in-the-home expenses and office supply and phone expenses) for Canadians working from home due to the COVID-19 pandemic:
- Employees with larger claims for home office expenses can still choose to use the existing detailed method to calculate their home office expenses deduction.
- Employees who worked for home more than 50% of the time over a period of at least 4 consecutive weeks in 2020 due to COVID-19 will now be eligible to claim the home office expenses deduction for 2020.
- New temporary flat rate method will allow eligible employees to claim a deduction of $2 for each day they worked at home in that period, plus any other days they worked from home in 2020 due to COVID-19 up to a maximum of $400. Neither Form T2200 or Form T2200S will have to be completed for this.
- For employees choosing the temporary flat rate method, simplified forms T2200S and Form T777S can be used.
- This method can only be used for the 2020 tax year.