On December 17, 2020, the Canada Revenue Agency (CRA) issued some guidance about how employees can deduct home office expenses, in light of the COVID-19 pandemic, by:
introducing a simplified flat daily rate deduction method
issuing NEW simplified forms T2200S and T777S
THE Temporary simplified method
For 2020, eligible employees will be able to claim a personal income tax deduction for home office expenses at a flat rate of $2 per day worked at home in 2020 due to COVID-19, up to a maximum of $400. To be eligible for this deduction, the employee must have worked at least 50% of the time from home over a period of at least four consecutive weeks in 2020, due to the COVID-19 pandemic.
If an employee deducts home office expenses using this simplified method for 2020, the employee will not be provide form T2200, Declaration of Conditions of Employment, from their employer and will not be permitted to deduct any other employment expenses for 2020.
The CRA has provided further information, and answers to “frequently asked questions” regarding this simplified method, on its website.
THE Traditional method
Employees may still choose to deduct home office expenses using the traditional method for 2020. To do so, the employee would be required to:
have a completed and signed form T2200, or new form T2200S as discussed below, from their employer
determine the percentage of time that they worked from home and their eligibility for deducting home office expenses
Deducting home office expenses
The CRA has issued a new simplified form (T777S, Statement of Employment Expenses for Working at Home Due to COVID‑19) for deducting home office expenses in 2020, which employees must complete and submit with their 2020 personal income tax return, whether using the simplified or traditional approach. In either case, the amount claimed is deducted from the employee’s total income and, therefore, the deduction will provide a tax savings. How much savings is computed in your tax return. The tax savings will be based on the employee tax payer's marginal tax rate.
In addition to providing further details for deducting home office expenses under the simplified and traditional methods, the CRA’s website has a calculator to assist an employee in determining their deductible home office expenses for 2020.
T2200S :Another new form!
To ease the administrative headache on employers who may otherwise have had many employees requesting form T2200 for 2020, the CRA has issued a simplified version shown here – form T2200S, Declaration of Conditions of Employment for Working at Home Due to COVID-19, to be used for an employee that is only able to claim expenses related to working from home However, employees with other employment expenses must continue to use the old form T2200.
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