In 2020, working from home has been required for many people. Although this work situation is not ideal for everyone, it still comes with its benefits.
There are certain work from home tax deductions that employees are entitled to.
Discover 5 of them in this article, as well as some of the tax responsibilities employers have towards their employees working from home.
1. Simplified deduction for those who work from home
On November 30, the Governments of Quebec and Canada unveiled a new simplified deduction approach for those who work from home.
Under the new tax laws, employees who have worked at home more than 50% of the time for a period of at least four consecutive weeks in 2020 are eligible for this deduction for that same year. If several people living at the same address worked from home, each of them is eligible for this simplified deduction.
Those who choose this simplified deduction can claim $2 per day of work from home, up to a maximum amount of $400 (200 days).
This simplified deduction is valid for both provincial and federal income tax returns. Those who use it could therefore receive a total of $800 in deductions.
This news is also beneficial for employers. If an employee opts for the simplified deduction, the employer does not need to fill out forms T2200 (federal) and TP-64.3 (provincial), which are known to complicate corporate taxation.
2. Stationery, office and computer equipment
There are other tax-deductible expenses for employees working from home who do not want to opt for the simplified deduction. These include everything that surrounds office stationery.
For example, this can include pencils, paper, notebooks, printer ink, staples, envelopes, stamps, etc.
Employers were also granted a $500 refundable amount for any employee who needed computer or office equipment to work from home. However, Revenu Québec and CRA have stated that this amount is not a tax-deductible benefit in 2020, as it has been in past years.
3. Residential internet fees
Internet access is essential for employees who work from home. Whether to participate in meetings, share documents or simply send emails, the internet is an essential tool.
Residential internet costs are therefore one of the work from home tax deductions. However, you can only deduct the proportion you use to work. For example, if you use 25% of your internet package for work, you can only deduct 25% of the amount from your taxes.
4. Your rent, based on the space your office occupies
Are you a tenant and work from home? Your rent may be tax deductible.
However, as with internet fees, your rent cannot be deducted in full. Only the proportion that you use as work space can be deductible.
Here are two examples of calculations you can do to figure out this proportion:
- If your work space is 30% of the area of your home and this space is used 100% for work, you can deduct 30% of your rent (30% x 100%).
- If your work space corresponds to 30% of the surface area of your home and 80% of this space is used for work, you can deduct 24% of your rent (30% x 80%).
5. Other expenses related to your workspace
Similarly, most other day-to-day expenses for the use of your work space at home may be tax deductible. Again, only a portion of these expenses can be deducted.
These expenses include heat, electricity, cleaning products, minor repairs and light bulbs. In addition, any expenses you would have made to adapt your space for teleworking can be considered in this deductible amount.
The condition to be eligible for these deductions is to use this space for work for at least 50% of the year, which is equivalent to 6 months of the year or 3 working days per week.
Profiting from work from home is possible
In short, there are several expenses that can count as work from home deductions for employees.
An employee may choose the new simplified deductions or the "regular" deductions. In the latter case, employers must make sure that they properly complete each T2200 and TP-64.3 form for each employee who needs it.
In 2020, the unique pandemic situation has forced many employees to work from home. This complicates things for employers who want to keep their corporate accounting and tax in order.
Are you an employer and need assistance with your corporate taxation? At T2inc, we will be happy to answer any questions you may have.
Request a quote to benefit from our services!
Frédéric Roy-Gobeil
CPA, M. TAX
As President of T2inc.ca and an entrepreneur at heart, I have founded many start-ups such as delve Labs and T2inc.ca. A former tax specialist at Ernst & Young, I am also a member of the Ordre des comptables professionnels agréés CPA and have a master's degree in taxation from the Université de Sherbrooke. With a passion for the world of entrepreneurship and the growth mindset, I have authored numerous articles and videos on the industry and the business world, as well as on accounting, taxation, financial statements and financial independence.
