Changes in technology and the Canadian workplace, over the past 25 years, have made the option of working from home, at least on an occasional or part-time basis, a common occurrence among Canadian employees. For most, the opportunity to take a break from sitting in traffic gridlock or rushing to catch the commuter train is a valued employment perk.
While advantages, such as these, would likely be enough to make working from home an attractive option, there is another even more compelling benefit. And, that benefit is in the form of tax deductions claimable for home-related expenses by qualifying individuals who work from home.
Of course, as with any tax deduction, there are conditions which must be met in order to qualify. Employees, regardless of whether they earn a salary or are paid by commission, must meet one of the following conditions in order to claim any home office deduction:
- the home work space is where the individual mainly (more than 50% of the time) does their work; or
- the individual uses the work space only to earn his or her employment income. He or she must also use it on a regular and continuous basis for meeting clients, customers, or other people in the course of their employment duties.
Once that threshold criterion is met, a broad range of costs become deductible by the employee. Specifically, a salaried employee can claim and deduct the part of specified costs that relate to his or her work space, including the cost of electricity, heating, and home maintenance.
Where an individual who qualifies under the criteria outlined above is a commissioned employee, an even broader range of costs become deductible. In addition to costs for electricity, heating, and home maintenance, a commission employee can also deduct a proportionate share of costs incurred for property taxes and home insurance.
Generally, the percentage of costs which can be deducted is based on square footage, and the employee can determine that percentage by calculating the square footage of the workspace as a percentage of the overall square footage of the home.
Whatever the percentage claimed, the Canada Revenue Agency can ask the taxpayer to provide documentation and support for claims made.
For example:
An employee who lives in a 2000 square foot house and uses a 200 square foot room as a home office can (assuming the basic criteria outlined above are satisfied) claim 10% of his or her costs for electricity, heat, and home maintenance incurred during the tax year. If that employee works on commission, he or she can also deduct 10% of costs incurred for property taxes and home insurance.
There is one further requirement for employees who seek to deduct costs incurred in relation to a home office, in that each such employee must have a Form T2200 completed by his or her employer.
On that form, the employer must certify that the employee was required to use a portion of his or her home for work-related purposes, indicate what percentage of the employee’s duties were carried out at that home office and, finally, indicate whether the employee is or is not being reimbursed for any home office expenses incurred. Where there is some degree of reimbursement, the employer must specify the type of expense reimbursed, and the amount of reimbursement. And, of course, the employee cannot claim a deduction for any expenses for which reimbursement was received.
In order to make a claim for home office expenses, there is clearly some paperwork involved. All employees seeking to make such a claim must total the amount of bills paid over the course of the year for electricity, heat and any of the inevitable home maintenance costs. Those working on commission must also verify amounts paid for property taxes and home insurance. However, given that such efforts will produce a deduction from income for tax purposes for costs which would have been incurred in any case, it’s likely that most employees would consider the return on that investment of time well worth it.
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