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. These simplified versions of the Forms T2200 and T777 respectively were created in an effort to ease the burden generated by an increased CRA requirement for these forms. The T2200S removes the onus on employers to calculate the percentage of time an employee was required to work from home and questions regarding the employment arrangement. The T777S determines the home office expenses deduction amount which employees complete and submit with their 2020 personal income tax returns. Both forms are for employees who are only able 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.
If an employee worked more than 50% of the time from home for at least four consecutive weeks in 2020 due to COVID-19, they may use the simplified method. Under this method, $2 a day, for each day worked at home up to a maximum claim of $400 may be deducted by the employee. This method does not require forms T2200 or T2200S but does require completion of form T777S.
For example, Steve worked from home from March 16 to August 30 and then three days a week from August 31 to December 31. Excluding holidays, vacation and sick days he worked from home for a total of 160 days in 2020. Thus, in this example, if Steve elected to utilize the Simplified Method, he would be entitled to $320 (160 days x $2 per day).
2. Detailed Method
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. This method requires both Forms T2200S and T777S to be prepared in addition to having supporting documents. This method requires calculations involving the amount of space and amount of time that space was used to claim a percentage of utilities. Office supplies and phone usage not reimbursed by an employer can also be claimed. Employees who earn commission income may also be able to claim a portion of property taxes, home insurance, and leasing of technical equipment related to earning commission income.
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.
Sign up for our newsletter and receive tax, accounting, and COVID-19 resources for your business!