Employees who've been required to work at home may be able to access a number of deductions
For a lot of Canadians, the COVID-19-induced remote-work reality has come with unexpected benefits, letting them either save time on commutes or save money by forgoing takeout and other now-unnecessary expenses. And according to one tax expert, Canadians working at home may also have a chance to save on their taxes.
In a recent article, Dale Barrett of Barrett Tax Law explained that employees who are required to work at home by their employers may claim deductions in respect of “employment expenses” assuming they have a T2200 form, also known as a “Declaration of Conditions of Employment” form, duly completed and executed by their employer.
“For an employee whose employer requires them to pay for certain expenses while carrying out the duties of employment, the T2200 form outlines which expenses an employee is required to pay for and whether (and how much) reimbursement is provided,” Barrett explained.
With a form having been completed and signed by the employer, an employee can deduct from their income any expenses that fall under those outlined in theT2200 form, subject to reimbursements or allowances that the worker has received in respect of the expenses. The deductible expenses may include travel expenses, vehicle expenses, office rental, assistants’ wages, costs for supplies used directly for work, cell phone and internet expenses, and other expenses for which the worker was not reimbursed or given an allowance.
“If you are claiming home office expenses remember to keep records,” Barrett said, noting that such claims among the many items for which people should expect CRA scrutiny. Under the tax rules, an employee whose T2200 indicates that they’re required to have a home office can claim a percentage of their carrying costs, which is determined based on the percentage of the floor area in their home used for business purposes.
Those living in a 1,000-square-foot home with 110-square-feet used for their home office may claim 11% of their carrying costs. Assuming it’s a rental home, the worker may claim 11% of their rent, heat, power, and insurance; if it’s a home they own, they could claim 11% of their mortgage interest, property tax, heat, power, and insurance. For audit purposes, the employee will need records of their actual expenses, and they will have to show the percentage of their home being used for business purposes.
“[I]n case taxpayers move and are not able to show their home office to the auditor, it is important to document the home office with photos and floor plans,” Barrett said. Back-up documents must be saved for the eventuality of an audit, he added, recommending that records be kept for six years from the end of the calendar year to which the documents pertain.
“And in the worst-case scenario where an auditor denies some or all of your expenses, you have 90 days from the date of reassessment to challenge the outcome of the audit,” he said.