- The COVID-19 pandemic has forced millions of Canadians to work from home. Now the Canada Revenue Agency is simplifying the rules to make it easier for people to claim some expenses related to their home office. Here with more is Georgia Swan, tax and estate planner with TD Wealth. Georgia, people who were working from home before the pandemic could claim expenses. So what's changed?
- Well, because of the pandemic, obviously, there were many people that were forced to work from home or had to work from home under the lockdown provisions. So what's basically happened now is the government has given us a little gift of providing us with a simplified method for claiming home office expenses, because, of course, once we started working from home, we may have had more expenses for heating and hydro and that sort of thing.
So in this particular case, what they've done is they've created a flat-rate method, where basically if you were required to work from home because of the pandemic, you worked from home more than 50% of the time, and for four consecutive weeks during this time, you're entitled to claim a flat-rate deduction from your income of $2 per day to a maximum of $400. And if you do choose to claim that deduction, you don't have to keep any supporting documents and you don't have to get anything signed by your employer. But you also have some other choices as well.
- And so how is the flat-rate method calculated?
- As I said, all you have to do is basically decide-- if you worked at least four consecutive weeks. And you can't include things like vacations or days off in those consecutive weeks. And conceivably, you could have worked a lot longer, of course. But if you've worked at least four consecutive weeks, you can use this flat-rate method.
And all you have to do is it's $2 per day, up to a maximum of $400, so 200 days. And there's a form that the government has created. It's called a form T777S. And that's the form that you're going to use to actually claim the deduction. And you'll see on it, it shows Option 1, Option 2.
And as I said, the first option, this flat-rate option, all you have to do is say, all right. I worked from home 150 days. And then you'll see a little times two. And then you claim your $300 deduction. But as I said, there's also another way to calculate it.
Again, a little bit simplified, but let's say, for example, you worked from home for more than 200 days. Or maybe you think that that $2 just isn't enough. You can then use a detailed method, which basically does require you to calculate the square footage of your home and what the square-- in relation to what the square footage was of your home office.
In that particular case, though, if you do decide to use the detailed method and all you have is home office expenses, then you do have to get a form signed by your employer. It's called a T2200S. Again, you would use that form T777S to actually show your calculations.
But for that one, as I said, that detailed method, you do have to get an employer signature. And you do have to keep supporting documents just in case the government asks you later.
- And what if I think that my overall expenses as a result of working from home were more than the $400, or if I have other employment expenses, then what?
- Well, if you have those forms that I've talked about-- and those two methods are only for working from home expenses. So that's a great question. If you have other employment expenses-- so for example, if you had vehicle expenses earlier in the year, so you want to claim those as well, then you have to use the old-- not the old system. It's the existing system, which is a T2200 form.
Your employer has to sign it. And again, you have to go through the calculation of calculating the square footage that you used as a home office, et cetera. But that existing format that some people might actually be used to, that's still there. But these new COVID-related options are only for working from home expenses.
And the other neat thing about it is in many families, for example, there were many people in the family working from home. So for example, both you and your spouse and maybe one of your children were all doing their jobs from home. In that case, each person has their own deduction available if you choose the flat-rate or the simplified detailed method that COVID provides, so that everybody has that option to use those. So that's a good thing.
As well, it's applicable to either part-time or full-time employees. So that's another good thing for it. This simplified method, the hope is that it'll help even more people be able to claim these expenses than the existing method does.
- I think that's very timely information. Now for those people who might feel a bit overwhelmed, because it sounds complicated, what you suggest to them that they should do?
- Well-- yeah. It is complicated. And there's a lot. That form T777S is helpful because it actually does provide a lot of information. But this is the year-- 2020 income tax year is going to be the year that your accountants and other professional advisors really need to become your best friends.
But if you do want some additional information, the government has created a calculator and has some good tips on their website. So if you go to canada.ca and you just search "working from home expenses," it will take you to that part of their website where you can get a lot more information and tips on this.
- Georgia, thank you very much for your time.
- Thank you.
- That's Georgia Swan, Tax and Estate Planner with TD Wealth.