If your workspace is now in your home, you are allowed to deduct certain expenses from your personal income tax return. This will reduce the total tax liability. If you have never claimed this expense before, be sure to review the choices on claim methods to find the option that suits your situation better.
The temporary flat method applies to those who worked from home for over 50% for at least four consecutive weeks from 2020 through 2022 due to Covid restrictions. In this option, you claim $2 per day to a stated maximum. You are not required to maintain documentation and your employer is not required to complete a T2200.
Keeping Records
The other option we advise our Mississauga clients, is the detailed method which covers eligible employees who work from home and those who were restricted to work from home due to Covid in 2020 through 2022. For this you must keep records of all expenses and your employer must complete and sign a T2200 or T2200S.
Obviously, with the detailed method, there will be more records to have on file plus you will need to determine the amount of space you allocated to your home office. Supplies and phone services are dealt with on T777S or T777.
Renting
Before you begin, realize that if you rent a home or apartment, you can deduct a percentage of that rent payment based on the amount of space you use for the home office. However, if you own you cannot deduct the percentage of the mortgage principal.
Calculating Space
To calculate the space, total the square footage (or meters) of the finished areas of the home (including halls, baths, and kitchen) and the size of the space you use for work and find the percentage that you allocate to your employment. If you simply used a portion of the open space or common area, you need to calculate the percentage of that room. If it is a common area or a room also used for other purposes you need to determine the number of hours daily and develop the percental of time you used the room for work.
Similarly, you can claim a percentage of the utilities, internet access, rent, etc. There are also exemptions like furniture, replacing windows or appliances, etc. Also, not eligible are costs for electronics (laptops, speakers, phones) or accessories (mouse, headset, camera).
If you are trying to decide between the two methods, here is a brief example. If you pay $2,000 per month in rent and use at least 10% of the overall space for your office, your expenses will be higher than the $500 flat fee deduction. If you did not keep any of your utility statements, now is the time to see how much documentation you can compile.
This deduction can impact your tax burden if you are eligible. For more information or help with this issue, contact a Capex CPA tax consultant. We are a leading Real Estate Accounting firm and one of our Accounting professionals will be able to better advise you on the best alternative for your situation. To contact us today click on this link —> https://capexcpa.com/contact