WORKING FROM HOME - How to claim home office expense

In order for home office expenses to be deductible against employment income, the employee must be required by contract to incur such expenses, and one of the following has to be met:

  • i. The home is where the employee principally (more than 50% of the time) does their work (Subparagraph 8(13)(a)(i)).

  • ii. The employee uses the space exclusively to earn employment income, and it is used on a regular and

  • ongoing basis for meeting clients, customers or other people in the course of performing employment duties (Subparagraph 8(13)(a)(ii)).

Given that the COVID-19 pandemic has required many to work from home, many more will likely be eligible under (i) than in previous years. However, at question is whether the workspace must be the main place of work in context for a specific period, such as the several months dictated by preventative COVID-19 measures.

If qualifying under provision (ii), a problematic issue is the requirement for regular and ongoing meetings. CRA has stated that those meetings must be in person; however, that position is outdated and tax court that have held video and teleconference meetings as well especially in the time of Covid.

What expenses are deductible?

A portion of household costs can be deducted, such as electricity, heating, water, rent, security and maintenance. If the individual is a commissioned salesperson, a portion of property tax and insurance can also be deducted. No employee can deduct mortgage interest or capital cost allowance.

When calculating the deductible percentage, a reasonable basis should be used, such as the area of the workspace divided by the total finished area (including hallways, bathrooms, kitchens, etc.). Expenditures that relate solely to the workspace and employment duties do not have to be prorated.

In addition, the employee must:

  • obtain a completed T2200;

  • prorate the personal usage based on space (portion of house) and time (portion of the day used for work);

  • prorate expenses that do not relate to the portion of the year when working from home; and

  • limit expenses to the amount of related income earned during the year, although the author recommends

  • limiting the claim to the income earned during the work from home period.

For more information, see CRA Guide T4044.

Jane Zhao