As first mentioned in the 2020 Fall Economic Statement, the Canada Revenue Agency (CRA) has introduced a temporary, simplified method for employees to claim home office expense deductions on their 2020 personal income tax return. In addition to this simplified method, simplified forms T2200S (Declaration of Conditions of Employment for Working at Home Due to COVID-19) and T777S (Statement of Employment Expenses for Working at Home Due to COVID-19) have been created and are now available. The simplified versions of the Forms T2200 and T777 respectively were created in an effort to ease taxpayers' administrative burden. The T2200S removes the onus on employers to calculate the percentage of time an employee was required to work from home in addition to queries regarding the employment arrangement. The T777S determines the amount of home office expenses deduction employees may claim on their 2020 personal income tax returns. Both forms are available for employees who are eligible to claim expenses related to working from home and have no other employment expenses. The CRA has provided an online calculator to help employees to determine their deductible home office expenses for 2020. These changes allow for three methods for employees to claim home office expenses on their 2020 personal income tax return.
Under this method, employees (see eligibility criteria) can claim $2 a day, for each day worked at home - up to a maximum claim of $400 that may be deducted by the employee.
| Eligibility Criteria | Employee worked from home more than 50% of the time for at least 4 consecutive weeks in 2020 due to COVID-19. To claim the maximum deduction, 200 days must have been worked at home in 2020 and all eligibility criteria must be met. |
| Forms Required | Complete form T777S on your 2020 personal tax return. No T2200 or T2200S forms required from employer. |
| Example | Steve worked from home from March 16 to August 30 and then three days a week from August 31 to December 31. Excluding stat holidays (x6), vacation days (x5) and sick days (x3) he worked from home for a total of 160 days in 2020. If Steve elected to utilize the Simplified Method, he would be entitled to a $320 deduction (160 working days at home x $2 per day). |
| How to Calculate Deduction | March 16 to August 30 (5 days x 24 weeks) = 120 Less 3 Stat Holidays* Less 5 Vacation Days 112 days August 31 to December 31 (3 days x 18 weeks) = 54 Less 3 Stat Holidays ** Less 3 Sick Days 48 days Total Days worked from home in 2020 [112 + 48]: 160 160 Days @ $2/day = $320 home office deduction claim *Good Friday, Victoria Day, Canada Day (stat holidays during the workweek) ** Labour Day, Thanksgiving Day, Christmas Day (stat holidays during the workweek) |
| Why use the simplified versus the detailed method? | - No requirement to calculate, summarize and retain records of your home office expenses. - No forms required from the employer. |
2. Detailed Method - Employees who do not earn Commission
If an employee meets the same criteria as outlined in the Simplified Method and the employee wishes to deduct specific and detailed expenses, the employee may use the Detailed Method. Note that if using the detailed method, the minimum 50% worked from home requirement continues. Only days worked from home during weeks where at least 50% of the week was spent working from home may be claimed.
Using the example above. Steve could continue to claim his days from home between August and December as he worked three days a week (60%) from home. If he only worked two days a week (40%) from home, he could not claim any time between August and December.
The Detailed Method requires both Forms T2200S and T777S to be prepared in addition to supporting documents to support the deduction. This method requires calculations involving the amount of space and amount of time that space was used to claim a percentage of utilities and other expenses.
Items that can be claimed for employees who do not receive commission (more details here):
- electricity, heat, water
- utilities portion of condominium fees
- home internet access fees
- maintenance and minor repair costs
- rent paid for a house or apartment where you live
- office supplies and phone usage not reimbursed by an employer
2. Detailed Method - Employees who earn Commission
Employees who meet the same criteria as outlined in the Simplified Method and also earn commission, may claim additional expenses using the Detailed Method. Forms T2200S and T777S, supporting documents and calculations involving the amount of space and amount of time that space was used are required.
Items that can be claimed by employees who receive commission (more details here):
- electricity, heat, water
- utilities portion of condominium fees
- home internet access fees
- maintenance and minor repair costs
- rent paid for a house or apartment where you live
- home insurance
- property taxes
- lease of a cell phone, computer, laptop, tablet, fax machine, etc. that reasonably relate to earning commission income
- office supplies and phone usage not reimbursed by an employer
3. Additional Employment Expenses Method
If an employee worked from home in 2020 and has additional employment expenses including motor vehicle expenses, professional fees, food and beverage, and others they must use the standard Forms T777 and T2200 to make their claim along with all supporting documentation such as receipts, mileage logs, amongst others.
If you have any questions about how these different methods may apply to your employees, please reach out to your Bateman MacKay Business Advisor.
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