New CRA rules around work from home make it harder to claim expenses

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In case you’re one of many hundreds of thousands of Canadians who worked from home throughout 2023, both full time or on a hybrid-work association, you’ll must take some further time this tax submitting season if you wish to declare a deduction in your home-office bills. That’s as a result of the “simplified technique” of claiming home-office bills is not accessible for the 2023 tax 12 months.

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Chances are you’ll recall that on account of the widespread work-from-home preparations that started as a result of COVID-19 pandemic, the Canada Revenue Agency (CRA) launched a simplified technique for workers to say home-office bills.

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Underneath this technique, which was accessible for the 2020, 2021 and 2022 tax years, you didn’t have to trace your precise home-office bills. As an alternative, workers may declare $2 per day for as much as 250 days, or $500 ($400 for 2020), as employment bills. No receipts or proof of your expenditures was wanted, and, most importantly, no CRA type was wanted out of your employer to certify your work-from-home association.

However for the 2023 tax return, which is mostly due on April 30, 2024, workers who want to declare home-office bills must undergo the tedious train of tallying all their bills, prorating them after which claiming the suitable quantity as a deduction on their 2023 returns.

Right here’s a fast information to the home-office expense guidelines for workers, which bills qualify and the way the calculation is meant to be carried out based mostly on the most recent steerage launched by the CRA earlier this month.

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To be entitled to deduct home-office bills, you should be required to make use of part of your house for work. The CRA has confirmed that the requirement to take care of a house workplace needn’t be a part of your formal contract of employment; slightly, it will likely be ample if there’s a verbal or written settlement.

The CRA just lately clarified that if you happen to voluntarily entered a work-from-home association together with your employer, the company will contemplate you to have been required to earn a living from home for tax functions, even in a hybrid-work arrangement.

For the 2023 tax 12 months, the CRA has acknowledged you may be certified to put in writing off your home-office bills if your house workspace is the place you “principally” — that means greater than 50 per cent of the time — carried out your duties of employment for a interval of no less than 4 consecutive weeks throughout 2023.

For instance, if you happen to’re in a hybrid-work association that has you go into the workplace on Tuesdays and Wednesdays (or 40 per cent of the time), this situation could be glad since you might be working from house the opposite three out of 5 weekdays (60 per cent).

Your workspace could be a designated room that’s used just for work, or it may be in a typical space that has different functions, resembling a kitchen desk the place you sit throughout working hours.

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To have the ability to make a declare for 2023, you’ll must get a signed copy of CRA type T2200- Declaration of Conditions of Employment out of your employer. The T2200 isn’t submitted together with your return, however you’re required to maintain it in case the CRA asks to see it later.

You’ll be able to declare quite a lot of home-office bills, resembling the price of utilities, lease, upkeep and minor restore prices, and residential web entry charges. You typically can’t deduct mortgage curiosity, property taxes, house insurance coverage, capital bills (resembling altering a furnace or home windows) or depreciation (capital value allowance).

Meaning the price of a brand new, ergonomic workplace chair isn’t tax deductible, neither is the price of a big, widescreen monitor, each of that are thought-about capital bills. The price of most traditional workplace provides, resembling printer paper, ink, pens and sticky notes, are additionally deductible.

Fee-based workers who promote items or negotiate contracts can declare some bills that salaried workers can not, particularly: house insurance coverage, property taxes and the prices to lease a cellphone, laptop, laptop computer, pill, and so forth., that relate to incomes fee revenue.

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For utilities, lease and different house bills, it’s good to allocate the bills on a “affordable foundation” to find out the portion associated to employment use. That is usually carried out by dividing the realm of the workspace by the entire completed space (together with hallways, bogs, kitchens, and so forth.) of the house. You’ll be able to’t embody bills associated to part of a house that was not used as a workspace, resembling the price of repainting a bed room the place you didn’t work.

The house-office expense deduction is calculated based mostly on eligible home-office bills, the share of the house’s space that’s used for a house workplace and, for a shared area such because the kitchen desk, the period of time labored from that area. To make your declare, you’ll want to finish CRA type T777 Statement of Employment Expenses, and file it together with your revenue tax return.

In case you labored from house for less than a part of the 12 months, you’ll be able to solely declare bills paid for the a part of the 12 months that you simply labored there no less than 50 per cent of the time for no less than 4 consecutive weeks.

Edward Rajaratnam, Canadian observe lead companion with Ernst & Younger’s (EY) world employment tax companies group, has been fielding quite a few questions from employers on the brand new guidelines for 2023, and the logistics of finishing T2200s for a number of workers.

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“I’m disenchanted that the principles didn’t come out earlier,” he mentioned, noting that employers are actually scrambling to place in place processes to get T2200s within the fingers of qualifying workers in time for private tax submitting season.

EY has held two webinars over the previous month to offer related and well timed data on the brand new T2200 guidelines to the enterprise group. It has additionally developed service options to assist ease the executive burden of employers in search of help in finishing the T2200s for tons of of workers — or hundreds in some circumstances — that will not have the sources to do the work internally.

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Non-public Wealth in Toronto. [email protected].

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