Does Canada have a work-from-home tax credit? That’s a question many Canadians may be asking if they’re approaching another tax season as part- or full-time remote employees.
The short answer is yes. Your home office expenses can help reduce the amount of tax you pay. The full answer includes a few different conditions and caveats around how this particular tax benefit works, how to qualify for it, and how much you might receive.
What is the work-from-home tax credit?
Technically, the tax benefit you can get for working from home isn’t a tax credit at all, it’s a tax deduction. The difference is subtle, but important. Tax credits directly reduce the amount of tax you owe; tax deductions reduce your taxable income.
If you work for an employer from home, you’re generally allowed to claim the cost of home office expenses to help reduce your taxable income, which may result in a smaller income tax bill.
In response to the COVID-19 pandemic, the Government of Canada established a simplified method to claim the work-from-home deduction for the 2020 tax year. The method has since been extended to cover the 2022 tax year.
The simplified system doesn’t require you to keep supporting documents. Your employer also doesn’t have to complete and sign Form T2200S or T2200. Basically, you can claim $2 for each day you worked at home in 2022 due to the COVID-19 pandemic. There’s a cap of $500, which covers 250 working days.
Nerd Tip: The working-from-home tax credit is only for employees who work from home — it’s separate from work-related expenses that you can deduct as a self-employed individual. If you run your own small business or do freelance work from home, you’ll want to investigate Canada’s business-use-of-home tax credits and deductions.
Eligibility for work-from-home tax relief
The easiest way to claim the working-from-home tax credit is to use the temporary flat rate method. To do so, you must meet all of the following conditions:
- You worked from home in 2022 due to the pandemic.
- You worked from home more than 50% of the time for at least four consecutive weeks in 2022.
- You’re only claiming home office expenses and not any other employment expenses.
- Your employer did not reimburse you for all of your home office expenses.
Alternatively, you can use the detailed method, which allows you to claim additional expenses such as portions of your utility bills, internet and rent. People who worked from home before the pandemic used this method and may continue to do so. You must meet all of the following conditions to qualify:
- You worked from home in 2022 due to the pandemic or your employer required you to work from home.
- You were required to pay for expenses related to the work space in your home.
- You worked more than 50% of the time in your work space for at least four consecutive weeks, or you only use your work space to earn employment income.
- Your expenses are directly tied to your work.
- You have a completed copy of Form T2200S or T2200 signed by your employer.
» MORE: How to file a tax return
What counts as a work day?
The government is particular about what it considers to be a work day, but luckily the criteria are fairly clear. Days on which you worked either part-time or full-time hours for your employer from home would qualify.
The following do not count as work days:
- Days off (scheduled or unscheduled).
- Vacation days.
- Sick days.
- Other leaves of absence.
What counts as a work space?
If you’re using the temporary flat rate method, there’s no need to determine the size of your work space. You’ll simply claim $2 for each work day (using the definitions above), up to a maximum of $500.
But if you’re using the detailed method, you’ll need to figure out the size of your work space to claim your expenses.
First, calculate the overall size of your home, including all finished areas such as hallways, bathrooms, and your kitchen. Then, measure your work space relative to your overall space.
For example, if your apartment is 1,000 square feet and you work in an office measuring 10 feet by 10 feet, your work space is 10% of your home. You’ll then be able to deduct that portion of certain expenses related to working from home.
Your work space doesn’t need to be a formal desk or designated room. If you use your kitchen counter or the family computer to do your work, it would still qualify as a work space.
How to claim the work-from-home tax deduction
When you file your taxes, you can choose to use the temporary flat rate method or the detailed method.
If you use the temporary flat rate method, you’d fill out Form T777S – Statement of Employment Expenses for Working at Home Due to COVID-19.
For the detailed method, you’d complete Form T777S or T777. Remember, if you choose the detailed method, you’ll need to get a completed and signed Form T2200S or Form T2200 from your employer, as well as keep records of your work-related expenses in case you get audited.
Your tax preparation professional will have all of these forms, and they’re included if you file your tax return using tax preparation software. If you’re doing your taxes by hand, you’ll need to locate the necessary forms on the Government of Canada website.
Frequently asked questions about the work-from-home tax deduction
It’s a tax deduction. Tax credits directly reduce the amount of tax you owe; tax deductions reduce your taxable income.
CRA allows all Canadian employees who worked from home during the COVID-19 pandemic in 2022 to claim up to $500 in employment expenses as a flat rate.
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