A recent article from CPA Canada, summarized here, shares the recent updates from Canada Revenue Agency (CRA) for home office expenses. Read the full article on the CPA Canada website, here. Note: the content of this article is presented as information only and is not intended as advice.
With many Canadians working from home last year, the Canadian Revenue Agency (CRA) is getting ready for more home office expense claims. Learn about the special rules for making these claims.
1. Claiming home internet access fees
Employees and employers relied heavily on internet access to ensure a smooth transition to working from home. As such, many may have questions about how to claim home internet access fees.
CPA Canada shares “to calculate the amount of internet access fees that relate to employment, the CRA’s calculator prorates these costs based on the workspace percentage.”
If an employee wants to use another method to calculate the employment-use portion of their home internet fees, the CRA outlines that it must meet all the following conditions:
- the cost of the internet plan is reasonable;
- the cost of the internet plan has been divided between employment and personal use on a reasonable basis; and,
- the employee is able to substantiate the amount of data used directly in the performance of their employment duties.
When completing tax forms, the employee should include the employment-use portion of the fees under “other expenses” on line 9270 of the T777 or T777S.
CPA Canada also highlights that for those using the online calculator the home internet fees should not be included in the box “Total electricity, heat, water and home internet access fees you paid from,” as this total number will be prorated by the workspace at home allocation.
As with all expenses, supporting documentation should be kept in case the CRA inquires further.
2. Adult child working at parents’ home
As employees quickly transitioned to a new working environment, some adult children may have found they were working from their parent’s home.
To address this scenario, the CRA specifies that multiple family members can use the temporary flat rate method for tax purposes, as outlined in the CRA’s FAQs. The CRA states “that each employee working from home who has paid home office expenses and meets the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses.”
Taxpayers must also be aware of additional considerations when it comes to this method. CPA Canada shares, “in situations where an adult child is working from a workspace in their parents’ home and pays an amount to that parent, the amount will only be considered rent for purposes of subparagraph 8(1)(i)(ii) if the amount was paid for the use of the workspace and the arrangement constitutes a landlord/tenant relationship. Further, the amount so paid must be reasonable in the circumstances. The absent the existence of a landlord/tenant relationship, the amount paid by an adult child in these circumstances would not be considered rent and therefore, no deduction can be claimed under either method.”
3. Interaction with CRA’s $500 reimbursement policy for home office equipment
Numerous employers are paying reimbursements and may have already benefited from the CRA’s temporary reimbursement policy on home offices. These costs could be associated with supplies and office equipment like desks, monitors, and chairs, which are not deductible as employment expenses.
That being said, CPA Canada reached out to CRA confirm that reimbursements solely for home office equipment are not a reimbursement for the purposes of question 2 on Form T2200S. The CRA clarified, “if the employer is reimbursed for the purchase of office or computer equipment, all of which are expenses that are NOT eligible to be claimed by the employee as employment expenses, they should indicate “No” for question 2 “Did you or will you reimburse this employee for any of their home office expenses?” on the Declaration of Conditions of Employment for Working at Home Due to COVID-19 (Form T2200S).”
4. Reimbursements of home office supplies
Employers have also made an effort to compensate employees for office supplies associated with working from home.
In terms of T777S, the CRA states, “you cannot claim any expenses that were or will be reimbursed by your employer.” As such, an employee cannot claim any expenses that were or will be paid by the employer. However the CRA notes, they can claim the portion of the eligible expenses that were not paid by the employer.
5. Calculating the utilities portion of condo maintenance fees
As more Canadians worked from home, many may be looking to claim utilities portions of the condo maintenance fees. However, determining the utility portion of maintenance fees will be difficult for most taxpayers. Most taxpayers will need to get information and details from the condo corporation’s financial statements, which can be difficult to obtain a copy of.
To assist those in this situation, the CRA will accept that “the administrator of the condominium building provides the information from either the current or previous fiscal year.”
Learn more
You can read the full article on the CPA Canada website.
