CRA simplifies claiming employee home office expenses in 2020‎

In a welcome development for employees who worked from home (“WFH”) in 2020 due to COVID-19 (and their employers), the Canada Revenue Agency (“CRA”) has simplified the process for claiming home office expenses for the 2020 taxation year. We wrote about the detailed rules for claiming home office expenses, and some of the associated issues in the COVID-19 context, in a previous article available here.

Under this simplified process, eligible employees who WFH in 2020 due to COVID-19 may choose one of two methods to claim home office expenses for the 2020 taxation year:

• Temporary flat rate method. Employees can claim a deduction of $2 per day that they WFH in 2020, up to a maximum of $400. Employees do not need to calculate or substantiate their actual home office expenses or obtain a Form T2200S (Declaration of Conditions of Employment for Working at Home Due to COVID-19) from their employer.
• Detailed method. Employees can claim a deduction for their actual home office expenses. While employees do need to calculate and substantiate their actual home office expenses and obtain a Form T2200S from their employer, to assist the CRA has published detailed guidance for employees and created the much more user-friendly Form T2200S to be used (instead of Form T2200) by employers.

Temporary flat rate method

Employees who meet all of the following conditions qualify to use the temporary flat rate method:

• The employee WFH more than 50% of the time for a period of at least four consecutive weeks in 2020.
• The employee is claiming only home office expenses and not any other employment expenses.
• The employee was not reimbursed by his or her employer for all of the home office expenses. Employees who are reimbursed for some of their home office expenses still qualify to use this method.

Using this method, employees can claim a deduction in computing income for the 2020 taxation year of $2 per day that they WFH in 2020, up to a maximum of $400. Days worked full-time or part-time from home count, while days off, vacation days, sick days, or other leaves or absences do not.

To claim a deduction using this method, employees must complete Form T777S (Statement of Employment Expenses for Working at Home Due to COVID-19) (“Option 1 - Temporary flat rate method”), enter the amount from Line 9939 on Form T777S on Line 22900 (“Other employment expenses”) on their 2020 income tax return, and attach Form T777S to their 2020 income tax return.

Since this method is not based on actual home office expenses, employees do not need to calculate or substantiate their home office expenses or obtain a T2200S from their employer.

More information on the temporary flat rate method is available here.

Detailed method

Employees who meet all of the following conditions qualify to use the detailed method:

• The employee WFH more than 50% of the time for a period of at least four consecutive weeks in 2020.
• The employee has a completed and signed Form T2200S from his or her employer. To assist, for the 2020 taxation year the CRA has created the much more user-friendly T2200S to be used (instead of Form T2200) and will allow it to be electronically signed by the employer.
• The expenses are eligible home office expenses.

Since this method is based on actual home office expenses, employees must calculate their actual home office expenses by determining which of their expenses are eligible and what percentage of those expenses are eligible (since eligible expenses must be apportioned between employment and personal use). To assist employees, the CRA has published detailed guidance on this, including a list of eligible expenses, webpage on determining the size and use of a home office, and calculator for calculating eligible expenses.

To claim a deduction using this method, employees must obtain a completed and signed Form T2200S from their employer, calculate their home office expenses, complete Form T777S (“Option 2 - Detailed method”), enter the amount from Line 9368 on Form T777S on Line 22900 (“Other employment expenses”) on their 2020 income tax return, and attach Form T777S to their 2020 income tax return.

Employees must keep the completed and signed Form T2200S from their employer and supporting documents substantiating all expenses claimed, but do not need to file these documents with the CRA.

More information on the detailed method is available here. 

Please contact any member of our National Tax Group with any questions you have about claiming employee home office expenses.

This article provides only general information about legal issues and developments, and is not intended to provide specific legal advice. Please see our disclaimer for more details.