As Autumn arrives and we get close to the extended personal tax deadline (yet again!), you may be wondering how your personal tax situation is impacted for 2020, the year we are currently in, the year of COVID-19. A topic that is top of mind for many clients and even family members who are now working mainly from a home office is, “Can I claim a deduction for this?”
(For some information related to filing your 2019 taxes or how much of your CERB payments you should set aside, check our blog post from earlier this year, available here. Please note the personal tax payment deadline has since been extended to September 30th).
The short answer is potentially! The Income Tax Act already has rules for employment expenses paid personally so we do not need to wait for new legislation to know if we can claim this deduction or not. Now is the time to start thinking about whether you qualify and what information you need to keep (and get from your employer) for proof.
What you need to know to qualify:
- A form must be signed by your employer for 2020 (called a “T2200”) (if you have more than one employer, you will need a separate form from each and a new form is needed every year). You cannot claim any expenses if your employer does not sign the T2200 form every year.
- The period for which you were performing your duties primarily from home (keep in mind that you can only claim expenses that relate to the time period where you were working from home more than 50% of the time OR the space you use must be only used for work and is used regularly to meet clients, customers, etc.). Your employer attests to this on the yearly form.
- In other words, if you only work from home one or two days a week and the rest of your 40-hour work week is spent in the office, you will likely not qualify to deduct expenses related to your home office since this is less than 50% of the time.
- Many employers mandated employees work from home for part of the year. You may be able to claim expenses for part of the year, but the legislation is unclear.
- Please note: The government’s current position is that virtual meetings do not count as meeting clients in your home.
- The square feet of the dedicated workspace in your home or apartment that you use to do your work for your employer.
- If the space or services are used personally during your off-work hours the calculations can become more complicated. The government says that if the space is “shared-use”, it is only appropriate to claim the portion that relates to your work hours.
- For example, if you work a regular 40-hour week from home but you, or others, use the space personally when you’re not working, the portion of expenses related to shared-use space should be further reduced to 23.8% of the total (8/24 hours a day x 5/7 days a week).
- The square feet of total finished/livable space in your home or apartment (exclude the basement and garage unless finished).
- You must pay your own expenses and keep copies of the bills/receipts (if someone else pays the bill or your employer reimburses you for it, you cannot include it or your employer must note how much you were reimbursed for those expenses).
- If the services are used personally during your off-work hours or shared with other people in your household (e.g., internet), then it’s only appropriate to claim the portion that relates to you and your work hours.
What you should save:
- A copy of the signed T2200 from your employer for 2020.
- Your receipts/bills for costs related to your workspace such as rent, electricity, heating, maintenance, property taxes, and home insurance.
- A portion of costs to maintain your home may or may not be allowed, depending on what it is for. Maintenance related to other areas of the house that are not your workspace are not allowed, while costs related solely to the workspace are fully deductible.
- How much of these expenses you can deduct will vary, depending on what the expense is for and how much is deemed personal.
- Not every bill comes in the mail anymore. You may need to search your email or login to an online portal to download your bills.
- Please note: As an employee, you cannot claim the cost of your new home office setup.
- Receipts for other business purchases you were required to make during your employment (that have not been reimbursed).
- The receipts you should save is unique to every employee’s work situation and in general really depends on which expenses your employer has stated you are required to cover on your own on the T2200.
This blog post is focusing on using a portion of your home for work, but your employer could also require you to buy your own supplies, hire an assistant, or pay for a cell phone, as some examples, and these are all deductible employment expenses, provided your employer has indicated these expenses are required on the T2200 before signing. I would like to re-iterate that the government says you cannot claim employment expenses if you do not have this form signed from your employer each year.
Do not wait until the end of the year to see if your employer will be providing this form! Covering your own employment expenses is something that should be discussed up front and is likely something you talked about when you were first hired. Your employer will not necessarily provide you with the T2200 automatically, so you may need to request it, but they should not have an issue with providing or signing the form if you were required to work from home.
For more information on what you are allowed to deduct as an employee, you can see the government’s Interpretation Bulletin here: IT352, Employee’s Expenses, Including Work Space in Home Expenses.
As always, if you need more information on your personal tax situation or would like a checklist to start getting ready for next year, please contact your RLB Trusted Advisor.