If you’ve opened this, you probably made the shift, alongside many other Canadians to work remotely. Congrats on this big change!
As a remote worker, you’re adapting to a new normal, testing out new work routines, and setting up new boundaries. Thinking about how this affects your taxes can feel daunting, and that’s normal.
That’s why we’re here to cover 5 important tax aspects you need to know about working remotely. Let’s get started.
- If you’re a salaried employee, your employer will deduct your income taxes from your paycheque according to their home province.
- You file your provincial taxes based on your where you live.
- You can deduct home office expenses if you meet certain criteria.
1. Where do I pay taxes as a remote worker?
As a Canadian citizen, foreign worker, or visa holder, if you work remotely in Canada, you have to pay income taxes in Canada. Your tax situation as a remote worker depends on whether you’re employed (you work for a company) or self-employed (you work for yourself).
If you’re an employee, you’ll get taxed based on the province where your employer is located.
For example: Let’s say you live in Vancouver, B.C., and work for an Ontario company. Your employer will deduct your Canada Pension Plan (CPP) contributions, employment insurance (EI) premiums, and income taxes at the Ontario tax rate.
Self-employed folks receive straightforward payments for their services and have their own CPP and optional EI process.
2. If I work remotely, which provincial tax rates apply?
When you file your income tax return, your tax obligations are based on your residency. So even if you live in a different province than your employer or client, you have to pay taxes for the province or territory that you’re living in.
3. What if I live in Canada and work remotely for a U.S. company?
As a Canadian resident working for a U.S. company, you’re taxed on your worldwide income, no matter where the income is earned, regardless of whether it’s earned from contract work or full-time employment. And remember, you must convert this income to Canadian dollars when submitting your T1.
Do I need to pay U.S. taxes?
Thanks to a tax treaty between the U.S. and Canada, you’re only obligated to report all your U.S. income on your Canadian tax return. If a U.S. company employs you, you’ll receive a W-2 form at the end of the year which outlines all your earned income in USD. Since you’ll have to convert this amount into CAD dollars, it’s wise to use an accredited bank’s exchange rate, such as the Bank of Canada.
How are my Canadian taxes impacted?
If you make any U.S. income, you’ll have to add it to your Canadian tax return and pay Canadian tax on it. To prevent double taxation, Canadian taxpayers can complete a form called, W-8BEN so they won’t have to pay U.S. taxes.
If taxes were deducted from your income, you can claim those taxes as if you paid them to the CRA. When the U.S. income tax rate is lower, you’d owe the difference between the U.S. and Canadian income tax rates.
4. How do I claim home office expenses as a remote worker?
As a salaried employee, you can deduct home office expenses if:
- Your workspace is where you work more than 50% of the time.
- Your employer requires you to maintain a home office as part of your employment terms and doesn’t reimburse you for the expenses you incur.
- Your employer files and signs Form T2200: Declaration of Conditions of Employment.
If you’re self-employed, you can claim your home office under these two conditions:
- Your home office must be the principal place of your business.
- The space must be used for ongoing business activities such as meeting clients, customers, or patients.
C$500 work from home tax deduction
5. What else can remote workers write off on their tax return?
If you’re a salaried employee, your eligible employment expenses are the ones approved by your employer on a signed T2200 form, regardless of whether you paid more out of pocket to earn your income.
While there are strict rules around what you can claim, some examples of employment expenses to claim are:
- Accounting and legal fees
- Advertising and promotion expenses
- Allowable motor vehicle expenses
- Food, beverages, and entertainment expenses
- Parking costs
- Work-related supplies and tools
- License fees
- Bonding premiums
- Leased computers, cell phones, and other equipment
For self-employed folks, there’s a wider range of expenses to claim. This includes home insurance, rent, mortgage interest, property tax, and maintenance costs such as heating, hydro, water, and electricity.
If any of this sounds complex or confusing, not to worry. We’re here and happy to help. With TurboTax Live Assist & Review, you’ll get unlimited assistance, and advice as you do your taxes, plus a final review before you file. Or, choose TurboTax Live Full Service and have one of our tax experts do your return from start to finish.
*TurboTax Live™ Full Service is not available in Québec.
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