With the rapid spike in the number of Canadians working from home due to the COVID-19 pandemic, there’s a good chance you are among those who adopted a home office over the past couple of years. In doing so, you have also likely taken advantage or at least heard of the work-from-home tax credits available.
Changes to the Work-From-Home Tax Credits Due to COVID-19
Tax credits have been available for many years for Canadians working from home, either as a self-employed or remote-based employee. However, the Canadian government has made several changes to them over the past couple of years due to the rise of COVID-19 in 2020.
First and foremost was introducing the flat rate method for the 2021 tax season. This allowed anyone who worked more than half of their time at home for at least four consecutive weeks in 2020 to claim $2 per day up to $400 on their taxes without any supporting documents or additional forms. This was to account for the additional in-home office expenses incurred without having to complete other calculations that would make tax filing more complex due to circumstances. And with the continuation of the pandemic in 2021 and now 2022, the Government of Canada saw to not only the continuation of this simplified method but has even made some significant changes to note.
.jpg)
Work-From-Home Tax Credits Changes for 2022
Much of the simplified method has remained the same for the 2022 tax season. Firstly, you must have worked more than half your time at home for four consecutive weeks in 2021 (and it will be the same in 2022 for next year’s tax season). Your employer must also not have reimbursed you for all your home office expenses—though, if they paid for part of them, you can claim for those unpaid expenses. However, the most significant change to note is in the amount you can claim. Those claiming the work-from-home tax credit using the simplified method can now claim $2 per day for up to $500.
To claim these on your 2021 taxes, simply use the temporary flat rate method on the tax Form T777S - Statement of Employment Expenses for Working at Home Due to COVID-19. Enter the appropriate amounts, then attach the form to your tax return. Don’t forget to enter the amount from Line 9939 on that form on Line 22900 on your total income tax return, as well. Using the simplified method, you won’t need to list your expenses so that you can cross that extra work off your list!
.jpg)
Claiming More Than $500 in Work-From-Home Tax Credits
If your home office expenses are more than the $500 allowed for with the simplified method, you can use the detailed calculation method. This method is a lot more in-depth and will require more time, so consider weighing the pros and cons of the amount you need to claim!
For this method, you will need to have worked from home during 2021, whether electively or due to COVID-19, at least 50% of the time for a minimum of 4 consecutive weeks. You must also have had expenses you needed to pay specific to your home workspace—utilities, internet, rent, property tax, office supplies, and phone costs. If these expenses were used entirely for the business and business only, you could claim the total amounts. However, if they were used both for home and work use, you will need to calculate the eligible amount by dividing the size of your home office space by the total square footage of your home.
There are some important things to note about using the detailed method to calculate your work-from-home tax credit. Firstly, you will need to have your employer sign a declaration of your conditions for working from home (either Form T2200 or T2200S, if specific to COVID-19). You will also need to use Form T777 to state your employment expenses in more detail.
Secondly, the eligible expenses you can claim can change depending on whether you are working commission or self-employed. And lastly, you cannot deduct an amount higher than your net business income (though that feels pretty self-explanatory).
If you found yourself converting to the home office lifestyle over the past couple of years, these helpful tax credits could be worth your while in maximizing your return and off-setting costs you may have incurred. You can always check out the Government of Canada website for details or chat with your dedicated tax advisor for more information. Not only can they help you take advantage of these potential returns, but if you’ve recently become a first-time homebuyer or have undergone some home renovations, they can even point out some other helpful credits you may want to take advantage of!