Many employers have required their staff to work from home during the COVID-19 isolation.  Looking toward next year’s tax return there will be questions about what can, cannot, and should be deducted as home office expenses.  It may seem a bit premature, but it is important to capture as much information now to be prepared for next spring rather than trying to reconstruct at that time.

Right now under the current Tax Act , employees who are not reimbursed by their employer for company-related expenses but are required to work from home may deduct those expenses under Form T2200.

Just remember that we are talking about next year and we don’t really know what the CRA will allow or require.  However, under the current laws, here is what is permitted: 

Home Office

There are some requirements:

• The employee is contractually required to work from home

• The employer certifies this on a T2200

• The space is exclusively used for work or to meet customers over 50% of the time 

Under the current situation, it will probably need clarification about virtual meetings and conference calls.  It is also under consideration about how or whether a signed T2200 will be necessary or if another approach will be approved.

Expenses

Normally deductible expenses include:

• Utility costs

• Maintenance 

Not deductible are:

• Capital expenses or depreciation

  • Equipment

  • Furniture

• Mortgage interest

• Property taxes

• Home insurance 

The deductibles are subject to the restrictions the CRA has established, like calculating the percentage of space you are using and applying that portion of the allowable expense to your tax return.

Technology

With forced isolation and social distancing, employers treated technology needs differently.

• Provided an allowance to cover

  • Upgrades

  • Webcams

  • Better headsets

  • Etc.

• Reimbursed the employee for those same expenses

Normally the CRA would consider the allowances or reimbursements as taxable benefits.  Right now they are saying that they will allow up to $500 as non-taxable as long as the employee can offer receipts.

Additional Considerations

Many of the CRA’s announcements are made from the perspective of a short-term (only a few months) required quarantine and workplace restrictions.  If the mandated limited exposure continues for a greater portion of the year, it is expected that other decisions will impact next year’s tax returns.

If you have not already done so, talk with your employer about filing a T2200 to certify your required work from home.

You definitely will not be allowed to claim a deduction if your employer is already claiming those expenses or providing you an allowance.  Double check to be sure how the boss is viewing the situation. 

Take the time now to gather receipts and documentation about the specific purchases and expenses related to your home work during the Coronavirus pandemic.  Then keep up with the paperwork as time progresses.  It could be beneficial next year.  When the situation settles down and we have a “new normal,” you may find that both you and your employer benefit from your working from home. 

If you have any questions or concerns, contact an accountant who should be able to give you good advice.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team