February 2, 2021
In its 2020 Fall Economic Statement, the federal government announced that, in light of the large numbers of Canadian taxpayers working from home due to the COVID-19 pandemic, the Canada Revenue Agency (the “CRA”) would simplify the process for claiming the home office expense deduction for the 2020 taxation year. Details regarding the temporary simplified method (the “Flat Rate Method”) for claiming this deduction were released by the CRA on December 15, 2020 and can be found here.
In order to qualify for the deduction, an employee must have been required to work from home due to the COVID-19 pandemic for at least four consecutive weeks during 2020. Employees who satisfy this condition will be entitled to claim $2.00 for each day they worked from home in that period, as well additional days worked from home in 2020 due to the COVID-19 pandemic, up to a maximum of $400.00.
Employees will have to choose between the temporary Flat Rate Method for claiming home expenses, and the traditional, detailed approach to deducting home office expenses (the “Detailed Method”). If employees choose to file under the Flat Rate Method, the CRA has indicated that employees will not be entitled to claim other employment expense deductions, such as motor vehicle expenses.
To facilitate the deduction of home office expenses, the CRA developed a simplified Form T777S (Statement of Expenses for Working at Home Due to COVID-19), which must be completed by employees claiming the deduction and filed with their income tax return for 2020. The T777S requires the employee to elect a claim under the Flat Rate Method and the Detailed Method (which generally permits the deduction of a proportion of eligible expenses incurred while working at home, for which the employee was not reimbursed by his or her employer).
In addition, the CRA has developed a simplified Form T2200S (Declarations of Employment for Working at Home Due to COVID-19) for employees electing to file under the Detailed Method which must be prepared and signed by the employer (the CRA has indicated that it will accept electronic signatures).
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