In most years, home office expenses were typically only claimed by entrepreneurs working primarily out of their homes. However, in 2020, COVID-19 brought the majority of the office-based workforce home, suggesting more people could claim at home expenses than ever before.
Statistics Canada shares, “Working from home continues to be an important adaptation to COVID-19 health risks, with 2.4 million Canadians who do not normally work from home doing so in October.”
To accommodate the influx of those working from home and claiming office expenses, a T2200 Declaration of Conditions of Employment form is required to be completed for each employee by their employer, which poses a huge administrative burden for employers as they try to accommodate the provision of forms for their entire workforce.
In response to concerns raised by employers, on December 15, 2020, the CRA announced additional information about how expenses can be claimed, including a new flat rate all employees can claim for their at-home expenses without the need for receipts or detailed documentation, or employer approval. This method aims to simplify the claims process and reduce administrative requirements for both employers and employees. However, it may not yield the highest return for everyone.
The New Temporary Flat Rate Method
In many cases, employees might be tempted to accept the flat rate for home office expenses. Eligibility is based on if an employee has worked more than 50% of the time from home for at least four weeks during the COVID-19 pandemic. Employees can claim $2/day for a maximum deduction of $400.
This rate is desirable since employees will not need to calculate the size of their workspace, keep supporting documents or get the T2200 form completed and signed by their employer. The flat rate can also be used whether your employer requires you to work from home or not. Even if a portion of home office expenses have already been reimbursed, this method can still be used.
The Detailed Method
For many employees, the detailed method of claiming all office expenses using Form T2200 will yield a higher return than the flat rate method. Based on our own team's calculations at ConvergentIS, it is likely that employees who have worked from home for several months of the pandemic will be eligible to claim more than the $400 deduction allowable under the flat rate method.
Under the detailed method, salaried and commission-based employees can claim home expenses such as:
Utilities (electricity, heat, water)
Internet (monthly home internet access fee can be claimed, connection fees and modem/router leases cannot)
Rent paid for your place of residence
Maintenance or minor repairs that relate to your workspace or repairs relating to your home furnace, air conditioner or cleaning supplies (not including capital expenses such as a new furnace or renovations that extend the life of existing products beyond their lifespan)
Commission-based employees who sell products or deal with contract negotiation may also be eligible to claim:
Lease of computer, cell phone or other electronics used in their day-to-day working activities
A more detailed explanation for what items can are eligible to claim can be found on the Canada Revenue Agency website.
Although it might be confusing to figure out what you can claim, the CRA has put together several tools and guidelines to help.
Why You Should Use the Detailed Method When Calculating Your Home Office Expenses Deduction
So how much is this deduction worth to your team members? We asked various members of our team from our director of online engagement to our marketing communications team. The result?
Deductions did range anywhere from a few hundred to nearly $2000, suggesting that in many cases - particularly for more senior team members - the detailed calculation method is worthwhile based on estimates from the CRA online calculator. We found this tool helpful in our own use, as it has made team members aware of the option that will provide the greatest return based on their own unique remote working circumstances.
As a reference point, employees might find the CRA’s downloadable infographic helpful.
Creating Forms in Batch
In a case where a large number of employees opt to use the detailed method, employers must be ready to provide their teams with a completed and electronically or manually signed form T2200 or T2200S.
To reduce the amount of time spent completing these forms, the CRA has released the simplified T2200S Declaration of Conditions of Employment for Working at Home During COVID-19 and the T777S Statement of Employment Expenses for Working at Home Due to COVID-19 forms. The new T2200S form is a one-page document with yes/no questions that can be completed more effortlessly than in previous years. Form T2200S (and the original T2200) certifies that you paid for your own employment expenses and is held by you rather than being included in your income tax return. In comparison, Form T777, is the detailed calculation of an employee’s allowable home office (and employment) expenses and requires the T2200 form from the employer. The T777S is the equivalent form, if the detailed method is used. Both the T777 and T777S are to be filed along with an employee’s tax return.
For large enterprises, thousands of forms may still require completion. ConvergentIS has created the T2200 add-on for the existing My Tax Forms application to complete these forms in batch, pre-populating the available information from SAP.
To learn more about our tax forms application and the T2200 form add-on, we encourage you to view our on demand webinar using the link below.