It might feel like the COVID-19 pandemic has impacted nearly every aspect of life, even your taxes.
After the pandemic was declared in March 2020, nearly 40% of Canadians were working from home, many of them for the first time.
If you’re one of the many Canadians who suddenly found yourself setting up shop in your basement or at the kitchen table in 2020 as a result of the pandemic, you may be eligible for a tax deduction this year. The Canada Revenue Agency has implemented a new tax form to “simplify claiming the deduction for home office expenses for the tax year of 2020,” according to the Government of Canada website.
Tannis Dawson, Vice President of High Net Worth Planning at TD Wealth, explains what this new form means for Canadians.
New way to claim work-from-home expenses
"If you were working from home in 2020 due to the COVID-19 pandemic, the government has introduced a new tax form which was designed specifically for Canadians who had to convert part of their home to their office," said Dawson.
The new form – called the T777S (Statement of Employment Expenses for Working at Home Due to COVID-19) – is for claiming home office expenses that you were not reimbursed for by your employer.
Who's eligible and what can you claim?
"If you spent at least 50% of 2020 working from home for a minimum of four consecutive weeks, you can claim up to a maximum of $400 on your taxes. This is a deduction against your income, not a benefit, so it reduces your overall income for the year," said Dawson.
Claiming expenses with this form was designed to be simple – a flat fee of $2 per day for every day you worked from home in 2020 – and both full-time and part-time workers can use the form to claim work from home expenses.
Each person in your household who is working from home due to COVID-19 who qualifies can apply for this deduction, and no receipts for expenses are required.
Read more: How benefits like CERB may affect your taxes
Have a lot of expenses to claim? There's another option
Canadians who worked from home due to COVID-19 for more than 50% of 2020, or those with more extensive home office expenses, can opt to explore a second option offered by the CRA which requires more information about your claims and expenses.
"If you have a lot of work-from-home expenses or worked from home more than 200 days in 2020, you have the option to also complete the more detailed T2200 [Declaration of Conditions of Employment] form. Part of this form includes a declaration from your employer, which you'll need to give to them to sign and complete," said Dawson.
READ MORE: How benefits like CERB may affect your taxes
With this more detailed method, Canadians may claim eligible expenses such as their rent, electricity, utilities, home internet access fees, basic cellphone service plan fees, and office supplies.
Non-eligible expenses include principal mortgage payments, electronics (e.g. laptops, smart speakers, cellphones) and computer accessories (e.g. computer mouse, monitor, headset, webcam). For a full list of eligible and non-eligible items, visit the CRA website.
"Anyone who worked from home for more than 200 days in 2020 might want to consider the more detailed method," said Dawson.
Here's a scenario that might help you decide which option is best for you.
If your home office space is at least 10% of your house's square footage, your rent is $2K per month, and you've been working from home due to COVID-19 since March 2020, then your eligible expenses would likely be well over the allotted $400 flat-fee deduction option.
"Anyone who rented last year and worked from home due to COVID-19 or is in a similar scenario should definitely consider the second, more detailed option," said Dawson.
For more information on tax filing, visit the Canada Revenue Agency website or speak to a tax professional.
Want to connect with a TD Wealth advisor to discuss how you can implement tax-efficient strategies? Visit the TD Wealth website.
The information contained herein has been provided by TD Wealth and is for information purposes only. The information has been drawn from sources believed to be reliable. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual's objectives and risk tolerance.