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Jamie Golombek: 'Simplified method' of claiming home office expenses will no longer be available from tax year 2023
Published February 8, 2024 • Last updated February 8, 2024 • 5 minute read
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To deduct your home office expenses, you must use part of your home for work. Photo credit: Getty Images/iStockphoto
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If you're one of the millions of Canadians who worked from home in a full-time or hybrid work arrangement in 2023, you'll need more time this tax filing season to claim the deduction . Home office expenses. This is because the “simplified method” for claiming home office expenses will no longer be available starting in the 2023 tax year.
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Canada Revenue Agency (CRA) simplifies claiming work-from-home expenses for employees in response to widespread work-from-home arrangements initiated by the COVID-19 pandemic You may remember that we introduced the method.
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This method, which was available for tax years 2020, 2021, and 2022, did not require you to track your actual home office expenses. Instead, employees can claim employment costs of $2 per day for up to 250 days, or $500 ($400 in 2020). No receipts or proof of expenditures were required. And most importantly, we didn't need her CRA form from her employer to prove the work-from-home arrangement.
However, for the 2023 tax return, which is typically due April 30, 2024, employees who want to claim home office expenses will have to aggregate all their expenses, prorate them, and claim the appropriate amount on taxes. You have to go through tedious work. It will be deducted when filing your 2023 tax return.
Here's a quick look at home office expense rules for employees, what expenses are eligible, and how they're calculated, based on the latest guidance released by the CRA earlier this month.
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To deduct your home office expenses, you must use part of your home for work. The CRA has confirmed that the requirement to maintain a home office does not need to be part of a formal employment contract. Rather, an oral or written agreement is sufficient.
The CRA recently clarified that if you enter into a voluntary work-from-home arrangement with your employer, even in a hybrid work arrangement, the tax authorities will consider you to be required to work from home for tax purposes.
For tax year 2023, the CRA will reimburse home office expenses if your home workspace is where you “primarily” (meaning more than 50 percent of the time) fulfill your employment obligations. I said I was entitled to write it off. For a period of at least four consecutive weeks during 2023.
For example, if you have a hybrid work schedule where you work in the office on Tuesdays and Wednesdays (or 40% of the time), this condition is met because you work from home the other three days. 5 weekdays (60%).
A workspace can be a designated room used only for work, or it can be in a common area that has other purposes, such as a kitchen table where you sit during work hours.
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To file a claim for 2023, you must obtain a signed copy of CRA Form T2200 – Declaration of Conditions of Employment from your employer. The T2200 will not be filed with the tax return, but he should keep it in case he is later asked to verify it by the CRA.
You can claim a variety of home office expenses, including utilities, rent, maintenance and minor repairs, and home internet access. You generally can't deduct mortgage interest, property taxes, home insurance, capital expenditures (such as replacing a furnace or window), or depreciation (capital cost allowance).
This means that neither the cost of a new ergonomic office chair nor the cost of a large widescreen monitor is tax deductible; both are considered capital expenditures. The cost of most standard office supplies, such as printer paper, ink, pens, and sticky notes, are also deductible.
Commission-based employees who sell products or negotiate contracts can claim some expenses that salaried employees cannot claim. Specifically, home insurance, property taxes, and lease costs associated with earning fee income, such as mobile phones, computers, laptops, and tablets.
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For utilities, rent, and other housing costs, you must allocate the expenses on a “reasonable basis” to determine the employment-related portion. This is usually done by dividing the area of the work space by the total finished area of the house (including hallways, bathrooms, kitchen, etc.). You can't include costs associated with parts of your home you didn't use as a workspace, such as the cost of repainting a bedroom you didn't work on.
The home office expense deduction is calculated based on your qualifying home office expenses, the percentage of your home's square footage used for your home office, and, if it's a shared space like your kitchen table, the amount of time you work in that space. To make a claim, you must complete CRA Form T777 Employment Expense Statement and submit it with your income tax return.
If you only worked from home for part of the year, you can only claim expenses paid for the portion of the year where you worked from home for at least 50% of the time, for at least four consecutive weeks.
Edward Rajaratnam, Canadian Practice Lead Partner in Ernst & Young's (EY) Global Employment Tax Services Group, discusses the new 2023 rules and completing the T2200 for multiple employees. We have answered numerous questions from employers about the logistics of
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“It's disappointing that the rules weren't announced sooner,” he said, adding that employers are now scrambling to put processes in place to get the T2200 to eligible employees in time for personal tax filing season. He pointed out that it has become.
EY held two webinars last month to provide the business community with timely and relevant information regarding the new T2200 regulations. It also reduces the administrative burden for employers seeking assistance in completing the T2200 for hundreds (even thousands) of employees who do not have the resources to do the work in-house. He has also developed a solution for the service.
Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is Managing Director of Tax and Estate Planning at CIBC Private Wealth in Toronto. Jamie.Golombek@cibc.com.
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