The federal government continues to support working Canadians during the COVID-19 pandemic. On Nov 30th, 2020, the CRA announced a new temporary flat rate method for calculating home office expenses that allows Canadians working from home due to COVID-19 to claim a deduction of up to $400.
We at TurboTax want to ensure you have all of the information you need to make a claim for this expense.
What is the $400 claim, and who is eligible?
- CRA allows all employees who worked from home during the COVID-19 pandemic in 2020 to claim up to $400 in employment expenses as a flat rate.
- This amount is a tax deduction and not a credit, which means you deduct it from your income to reduce your tax liability but will not result in a refund.
I have never claimed employment expenses before. How is the $400 claim different this year?
Regular employment expenses for salaried and commissioned employees have to be approved by the employer by signing the T2200 “Declaration of Conditions of Employment” form. For 2020 taxes, the CRA allows employees to claim up to $400 in expenses without a signed T2200 from the employer.
How do I claim the deduction?
You will need to fill the new T777-s “Statement of Employment Expenses for Working at Home Due to COVID-19” form to claim the deduction.
What expenses can I claim?
You can claim the following expenses if you are a salaried employee:
- Rent paid for a house or apartment where you live.
- Utilities such as electricity, water, heat, or the utilities portion of your condominium fees
- Maintenance (minor repairs, cleaning supplies, light bulbs, paint, etc.)
- Home internet access fees
- Office supplies (stationery items, pens, folders, sticky notes, postage, toner, ink cartridge, etc.)
- Employment use of a basic cell phone service plan
- long-distance calls for employment purposes
If you are a commissioned employee, you can also claim the following:
- property taxes
- home insurance
- lease of equipment such as a cell phone, computer, laptop, tablet, fax machine, etc. that reasonably relate to earning commission income
All of the allowable expenses have to be prorated to the portion of the house you are using. For example; if you have a 5-room house, and you are using one room, you prorate by 1/5.
I bought a new printer and a monitor to be able to perform my job at home, can I claim this equipment as expenses?
No. These are considered to be capital expenses that have a long-lasting value and have to be claimed as Capital Cost Allowance (CCA). CCA is not eligible for Salaried or Commissioned employees working from home.
However, as mentioned above, if you lease this equipment, you can claim these amounts as expenses.
I worked from home in 2020. Do I automatically qualify for the $400 claim?
Yes. This claim is available for people whether they used to work at the work location and due to COVID-19, they had to work from home, or if they work from home as a job requirement regardless of COVID.
In the case when your job requires you to work from home regardless of the COVID pandemic, you can claim more than $400 flat rate of employment expenses if your employer provides you with a signed T2200 “Declaration of Conditions of Employment”. In this case, you will be required to fill the T777 “Statement of Employment Expenses” form and file it with your tax return.
My home office expenses exceeded $400. Can I claim the extra amount?
Yes, you can if you have the new T2200-s “Declaration of Conditions of Employment for Working at Home Due to COVID-19” signed by your employer stating which expenses they are allowing you to claim.
What is the difference between the old forms and the new ones?
In previous years, employees were able to claim employment expenses if they had a signed T2200 and filed the T777 along with their income tax return. These forms allow you to claim a wide range of expenses including home office expenses, vehicle expenses, other expenses, and GST rebate.
Due to COVID-19, CRA introduced simplified forms T777-s and T2200-s to claim the home office expenses only.
To calculate your home office expenses, you can use one of two methods:
Temporary flat rate method
You can use this method if you had worked from home more than 50% of the time in a 4 consecutive week periods. Claim $2 for each day that you worked at home during that period, plus any other days you worked at home in 2020 due to COVID-19, up to a maximum of $400. You don’t need any supporting documents for this method, nor do you need a signed T2200. Claim the amount on line 22900 of your tax return.
To be able to use this method:
- you had to work more than 50% of the time at home for one month or more
- you need a completed and signed T2200-s Declaration of Conditions of Employment for Working at Home Due to COVID-19
- you have to keep supporting documents in case CRA requests them
- you cannot claim any expenses that have been reimbursed by your employer
You will need the following information to complete this method:
- List of all the expenses (other than the use of home) such as office supplies, cellphone usages, etc. on lines 1 and 2 of the T777-s
- The percentage of space used for work in relation to the total home space (if you use one room in a 5 room house, your workspace is 20% of the total space)
- List of expenses that relate to the use of the home office such as utilities, rent, maintenance, property taxes, etc. on line 6-10 of the T777-s
Joshua is using a room in his house that represents 10% of the total house size. He is using this room for 40 hours out of a total of 168 hours in the week. The employment use percentage is =
10% x 40/168 = 2.4%
Joshua incurred the following expenses during the period he had to work from home:
- Electricity: $1,200
- Heat: $800
- Internet: $200
- Paper and ink cartridge: $400
His total utilities expenses = $1,200 + $800 + $200 = $2,200
His office space expenses = $2,200 * 2.4% = $52.80
His total allowable expenses = office space expenses + other expenses = $52.80 + $400 = $458.80
Keep in mind that Joshua did not include the office supplies expenses in the calculation of the office space since he used these expenses in full for his work.
Check the CRA calculator to estimate your employment expenses for this year.
My expenses exceeded my employment income. Does this mean I will get a refund?
No. As mentioned above, the employment expenses are a deduction on line 22900 that will reduce your income, thus reducing your tax liability. You cannot claim a negative amount to produce a refund. However, you can transfer the excess of the remaining expenses to future years and claim them against the income from the same employment.
I was contracted last year and was informed that I will be receiving a T4A instead of T4 for my income. Can I claim employment expenses?
No. If you receive a T4A instead of a T4, this means that you were contracted as a self-employed, not as a salaried or commissioned employee. You file a T2125 “Statement of Business or Professional Activities” form to claim your expenses instead of T777 or T777-s.
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