This week, TraveLaw Online’s Doug Crozier and Tim Law of Heifetz, Crozier, Law respond to a question from a reader who has been working at home for the past three months and is wondering what expenses can be claimed as a result.
Q: I’ve been working from home for three months now. What expenses can I deduct as a result?
A: We’ll assume you are an employee. Different rules apply to Independent Contractors.
Employees like you have to satisfy two conditions in order to get to deductibility.
First, the expenses have to be incurred by you and not reimbursed by your employer, who has to confirm this fact by signing CRA’s Form T2200 (https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2200.html).
Second, you must use the home workspace for at least 50% of your overall work-time, OR it must be used regularly and continuously only for the work purpose of earning income by meeting clients/customers/etc.
This second hurdle can be confusing.
If COVID has driven you to work-at-home, it’s clear that you’ll probably have worked there for 100% of the work-time in the past three months; but if the 50% threshold must apply to the taxation year, you may only be at home for 25% of the year, and thus under the threshold.
As well, there is no clarity as to whether a Zoom conversation or a phone call will qualify as a “meeting;” i.e. is a face-to-face coming together of people in the same physical space required for it to be a “meeting?”
Expect CRA to try to clarify these two issues across-the-board via Interpretation Bulletin, rather than hashing them out one-by-one as it reviews individual returns.
If you do meet these thresholds, expect to be able to deduct utilities (e.g. heat, electricity, water), the costs of supplies, and rent for the relevant area of your residence. But not property taxes, mortgage interest, insurance or depreciation. This latter exclusion means that capital purchases like a new computer/desk/chair/fan/cabinet/etc. for the home office can’t be written off over time.
Expenses that qualify cannot exceed income earned for the same taxation year. Thus, you cannot use these home-office expenses to create, or to increase, a loss in the year. However, with some limitations they can be carried forward to a future year and used then.
All of this is subject to what your accountant says. She or he ought to be consulted for the sake of certainty.
TraveLaw Online appears in Press Today every Wednesday and if you have a question, you can contact Crozier or Law at firstname.lastname@example.org or connect with Bob Mowat at Canadian Travel Press/Baxter Media at email@example.com.
Heifetz, Crozier, Law is a Toronto law firm that has for years represented all aspects of the Canadian travel industry. The lawyers at HCL also maintain a non-travel practice, covering litigation, real estate, Wills, corporate/commercial matters, etc. To contact HCL, e-mail firstname.lastname@example.org.