Countless companies across Canada have asked their employees to work from home due to the COVID-19 outbreak.
As a result, many workers are entitled to claim tax relief on some of the costs they incur while working from home.
If you are working from home while in Canada on a working holiday, you may be unsure of how to claim back your expenses.
But don't worry, we're here to help!
In this handy guide, we're going to share everything a working holidaymaker needs to know about claiming working from home expenses in Canada.
I am working from home. Can I claim expenses?
If you work either full time or part-time you may be eligible for tax relief.
The type and amount of expenses you can claim vary and depend on the type of work that you do.
What expenses can I claim when working from home?
Working holidaymakers can claim tax relief on home office expenses, such as:
- electricity, heat and water bills,
- property taxes,
- home insurance,
- license fees,
- Training costs (when upgrading your skills that relate to your employment)
It's important to note that there are a number of costs which do not count as expenses, such as mortgage interest or capital cost allowance.
How can I claim these home office expenses?
In order to claim work-related expenses, you need a T2200 Form, (Declaration of Conditions of Employment). This form is completed by the employer and provided to the employee.
On this form your employer must provide details of the expenses you are required to make as part of your work and whether you received any reimbursement for them.
If you work as a tradesperson or an apprentice mechanic, you must include a list of your required tools with your T2200 Form.
Finally, your form must be signed and dated by your employer. Additionally, you must keep all of your relevant receipts and invoices for the eligible expenses for 6 years after the end of the tax year. This is so you can account for the expenses should the taxman ever come calling.
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New temporary flat rate method
You are eligible to use this method if you worked more than 50% of the time from home for a period of at least 4 consecutive weeks in 2020 due to the pandemic.
You are able to claim $2 for every day you worked from home during this period plus any additional days you worked from home in 2020 due to COVID-19.
The maximum an individual can claim using the new temporary flat rate method is $400 (or 200 working days).
Keep in mind that this method can be used only for the 2020 tax year.
If you are a full-time and part-time worker, you are eligible for tax relief.
Unlike the previous process, you will no longer be required to get a Form T2200 or Form T2200s signed and completed by your employer.
You are eligible if:
- Due to the COVID-19 pandemic, you worked from home
- For a period of at least 4 consecutive weeks in 2020, you worked more than 50% of the time from home
- You are only claiming home office expenses and not claiming any other employment expenses
- Your employer did not reimburse you for all of your home office expenses
What counts as a work day, temporary flat rate method?
Days that can be counted:
days you worked full time from home
days you worked part-time from home
Days that cannot be counted:
vacation days, days off, sick leave days, other leave or absence
How does the detailed method work?
To claim the home office expenses for the period that you worked from home, you can also use the detailed method.
With this method, you will be able to claim the actual amounts you paid, supported by documents. You will have to separate those expenses between your personal use and your employment use.
You must determine the use and size of your workspace to calculate your claim for work-space-in-the-home expenses.
Eligibility for the detailed method:
if your employer required you to work from home or you did it in 2020 due to the pandemic
for a period of at least 4 consecutive weeks in 2020, you worked more than 60% of the time from home
you have a signed and completed from your employer Form T2200, and Form T2200S
during the period, the expenses are used directly in your work
What is new in the process?:
created simplified Form T2200S and Form T777S for claiming only working from home expenses (if you have other work related expenses you need the standard T2200 and T777 forms)
will accept an electronic signature on Form T2200 and Form T2200S only for 2020 tax yearto reduce the necessity for employers and employees to meet in person
All salaried employees and commission employees are able to claim:
maintenance and minor repair costs
utility portion (water, heat and electricity) of your condominium fees (if you can calculate the portion of the fees you used within your personal unit using a reasonable basis)
rent paid for a house or an apartment where you live
home internet access fees
Commission employees can also claim:
lease of a cell phone, tablet, laptop, computer, etc. These expenses should relate to earning commission income
Commission employees and salaried employees cannot claim:
home internet fees
capital expenses (replacing windows, flooring, etc)
principal mortgage payments
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Are there any conditions I must meet to qualify for remote working tax relief?
At least one of the following two conditions should be met in order to claim working from home expenses. In the current circumstances, the majority of working holidaymakers should be able to meet the first condition of mainly working from home.
You have to work mainly from your home (more than 50% of the time). You have a separated workspace in your home which you use only to earn employment income.
You also have to use the workspace regularly and for a continuous period of time to meet clients, customers, or other people in the course of your work responsibilities.
Which method should I choose?
If you are a homeowner rather than a renter, it is likely that the new scheme will be appealing to you.
For example, Justin is a homeowner who has been working from home since March 16. He works in the kitchen, which accounts for 20 per cent of the total square footage of his house.
His percentage of the home that is considered to be used as a workspace is 5%, аs he works only 42 hours per week, out of a total of 168 hours in the week or 25% of the time.
If he paid $500 monthly for all utilities for 9.5 months in 2020, his employment portion is $238 ($500 X 9.5 X 5%).
It would be much easier for Justin to claim $2 per day for 200 days, instead of tracking receipts and having to obtain T2200S from his employer.
Let’s take a look at another example. Jessica is also working from home since March 16 and is a renter. She pays $2600 for a two-bedroom apartment in Ottawa and spends $400 on electricity and home internet. She works in a bedroom that occupied 25% of the total square footage of the home.
This room is used exclusively for work and this is why her claim is not changed by the time the bedroom is used personally. Her deduction for 2020 will be $7125 ($3000 X9.5 month X 25%) and she will need all her receipts and a signed T2200S from her employer.
How do I file a working from home tax return?
In addition to your T1 annual income tax return, you must also file a Form T777 (Statement of Employment Expenses) to claim your work related expenses, if you need to claim only working from home expenses you can use the simplified Form T777S (Statement of employment expenses for working at home due to COVID-19).
You use this form to calculate how much eligible work-related expenses you can claim.
You're entitled to deduct the part of your costs that relates to your workspace such as your expenses for utilities.
To help you calculate your work-related expenses we have made an example
Working from home expenses = (Size of your workspace ÷ Total home size)*Total eligible expenses
Example: You have completed form T2200 from your employer and use a 6 square meters room in your apartment for an office during the whole year. The total size of the apartment is 60 square meters. The total utility expenses are $4,000 for the year. So, the expenses you can claim for the year according to the formula are:
(6÷60 meters)*$4,000= $400
If you worked from home for a limited period of time (for example 3 months) the expenses should be calculated according to the period. The expenses of $400 from the above example should be divided by 12 months and multiplied by 3 months and the amount that can be claimed as a deduction from your income will be $100.
However, this calculation method may not be appropriate for all types of costs. For example, you can claim maintenance expenses if the expenses you paid (such as cleaning materials or paint) were used only to maintain your workspace. If a part of these materials were used to maintain a part of your home not used as a workspace, then you cannot deduct any part of them.
What are the guidelines to follow when calculating working from home expenses?
The amount that you can deduct as working from home expenses cannot exceed the amount of your employment income. This means that you are not allowed to use workspace expenses to create or increase a loss from employment on your working holiday.
You can only deduct workspace expenses from the income to which the expenses relate, and not from any other income. Therefore if you had eligible work expenses and form T2200 or T2200S from more than one employer you have to complete form T777 or T777S for each employment income.
If some part of your workspace expenses in the year is not fully deductible in the tax year, you can carry it forward to the next year and claim it on form T777 as long as you are still working for the same employer. However, you still cannot increase or create a loss from employment by carrying forward workspace expenses.
Who can help me to claim my tax entitlements?
If you would like to ensure that you receive your maximum legal tax refund, you should apply with Taxback.com.
Our Canadian tax team will ensure you avail of every tax relief you're entitled to and that you receive your maximum tax back.
Our average Canadian tax refund is $998 so it's definitely worth claiming back what you're owed!
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