The problem was that the number of employees working from home in 2020 increased substantially because of the pandemic. Many of these employees were new to claiming home office expenses, which meant there was a substantial learning curve. It also meant more paperwork for employees, employers and the CRA.
As such, the CRA decided to introduce a flat rate method to simplify this process.
As with 2020, many employees who normally worked in office continued to work from home for all or a portion of 2021. As such, these employees may again use the temporary flat rate method on their tax return - employees will also be able to use the flat rate method for the 2022 tax year.
How does the flat rate method for home office expenses work?
Under this method, your employees must have worked from home for more than 50% of the time over four consecutive weeks in 2021.
This includes being required to work from home or choosing to work from home when an employer provides the option because of the pandemic. Once your employees meet this requirement, they can claim any additional days they worked from home due to the pandemic, even if they do not add up to 50% of their work week.
Note: If your employees are claiming other employment expenses on Line 22900 (such as motor vehicle expenses), or you reimburse employees for all their expenses, they cannot use the flat method.
If your employees do use the simplified method, they won’t have to save bills for eligible expenses or calculate the portion of these expenses that were work related. Instead, your employees can simply claim $2 for each day they worked from home up to a maximum of 250 days (total deduction of $500) in 2021 and 2022. For 2020, employees can claim $2 per day for up to 200 days.
If employees claim expenses using the flat rate method, you will not need to submit a T2200 or T2200S.
What about the detailed method for home office expenses?
If your employee is claiming other employment expenses on Line 22900, they will have to use the detailed method. Employees can also opt to use the detailed method if they incurred more expenses than the amount provided using the flat rate method.
To be eligible for the detailed method of calculating home office expenses:
Under this method, your employee will be claiming the employment portions of actual expenses paid. As a result, they’ll have to collect all bills for eligible expenses. Eligible expenses for 2021 include:
Once your employee has gathered their receipts, they will have to determine what portion of their home was used for their home office and when they worked from home (i.e. you can’t claim expenses for any time when you were back at work full time).
Employees can also claim additional expenses if you require them to pay for office supplies, including but not limited to:
These expenses cannot be claimed under the flat rate method. If your employee opts for the detailed method, you will have to complete a T2200 or T2200S.
For more information on employee’s claiming home office expenses for 2021 or 2022, contact our team of chartered professional accountants today.