While not specifically related to employment law, I thought that the information below might be of value to you and/or your employees.
The CRA has clarified information on the topic of work from home expenses and also provided some additional relief with respect to the taxation of certain employee benefits during the COVID-19 pandemic in order to mitigate some of the extra costs associated with traveling to work safely.
I have summarized some of the most important details below. For your reference, this page on the government of Canada website provides full details:
Home office expenses for employees: What the changes are
CRA revisions to work from home expenses policies
For the 2020 tax year only, employees who have worked from home for at least one month due to COVID-19 can choose to deduct home office expenses through one of two methods:
- the new Temporary Flat Rate Method (new)
- the existing, but simplified, Detailed Method
Temporary Flat Rate Method
The new Temporary Flat Rate Method allows eligible employees to deduct C$2 per day for every day worked at home due to COVID-19, without regard to the expenses actually incurred, up to a maximum of C$400.
To be eligible for the temporary flat rate method, an employee must have worked from home due to COVID-19 more than 50 per cent of the time for a period of at least four consecutive weeks in 2020.
NOTE: Employees who chose to work from home when given the option are still eligible for the temporary flat rate method.
- Employees may count the days in the four-week period and any other day the employee worked from home due to COVID-19.
- Employees are not permitted to count days off, vacation days, sick leave days or other leaves of absence.
- Eligible employees may still claim the deduction if their employer reimbursed some home office expenses.
Employees will not need to file supporting documents, but it is expected that employees will need to be able to demonstrate which days they worked from home in 2020 if the CRA were to conduct an audit.
New simplified Detailed Method:
Employees who meet the eligibility requirements for the temporary flat rate method are also eligible to use the simplified Detailed Method.
Under the Detailed Method, employees may deduct the actual amount of supplies and home office expenses incurred while working from home, provided they have the necessary supporting documentation and a completed new Form T2200S.
The new Form T2200S is a simplified version of the traditional Form T2200 specifically tailored for working at home during COVID-19. It is a one-page document that requires the employer to complete the employee’s name, the employer’s address and answer three yes or no questions. The employer then completes the employer declaration.
Link to Form T2200S
The list of eligible expenses is the same as under the regular rules, i.e.: eligible expenses are limited to supplies consumed during employment and home office expenses used directly for work and not reimbursed by the employer.
The one recent change (applicable to the regular process and the simplified process) is that the CRA announced that reasonable home internet access fees (but not connection fees) are eligible expenses.
The chart below sets out common eligible/non-eligible expenses.
A more detailed list of eligible/non-eligible expenses can be found on the CRA’s website.
| Eligible Expenses | Non-Eligible Expenses |
- Rent paid for a house or apartment
- Electricity, water, heat or the utilities portion of condominium fees
- Maintenance (minor repairs, cleaning supplies, light bulbs, paint, etc.)
- Home internet access fees
- Office supplies (stationary items, pens, folders sticky notes, postage, toner, ink cartridge, etc.)
- Employment use of a basic cell phone service plan
- Long distance calls for employment purposes
Employees who earn commission income can also claim the following:
- Property taxes
- Home insurance
- Lease of a cell phone, computer, laptop, tablet, fax machine, etc. that reasonably relate to earning commission income
|
- Capital cost allowance
- Mortgage interest
- Principal mortgage payments
- Capital expenses (replacing windows, flooring, furnace, etc.)
- Office equipment (printer, fax machine, briefcase, laptop case or bag, calculator, etc.)
- Monthly basic rate for a landline telephone
- Cell phone connection or license fees
- Internet connection fees
- Purchase of a cell phone, computer, laptop, tablet, fax machine, etc.
- Computer accessories (monitor, mouse, keyboard, headset, microphone, speakers, webcam, router, etc.)
- Other electronics (television, smart speaker, voice assistant, etc.)
- Furniture (desk, chair, etc.)
|
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Calculating Eligible Expenses
Employees can deduct home office expenses only for the part of the year the employee worked from home and the portion of the home office expenses related to working in their home office.
Employees will need to determine the size of their workspace at home as a proportion of the overall size of home (e.g., the spare room is 10 per cent of the size of the apartment).
The eligible portion of the expense will also depend on whether the space is used exclusively for work (e.g., a designated room) or a shared space (e.g., the dining room table).
If an employee has a designated room, the deduction is not affected by the hours the space is used for work.
However, if an employee is using a shared space (e.g., dining room), the deduction is based on the percentage of time that space is used for work (e.g., 40 hours out of 168 hours each week).
As an example:
- Eligible employee pays C$2,000 per month in rent
- Work space (eg dining room) is 10 per cent of total rented space
Employee can deduct:
- C$200 per month if the workspace is a designated room, or
- C$47.60 per month if the workspace is a shared space used 40/168 hours a week for work.
Required Documents
Employees will need supporting documents for the expenses that they deduct from employment income.
Employees will also need an executed new Form T2200S signed by their employer.
Commuting Costs and Parking
Allowances, reimbursements, and payments for commuting costs and parking expenses generally constitute taxable benefits for an employee.
However, in light of the COVID-19 pandemic, the CRA has adopted the following positions with respect to the taxation of employee commuting and parking benefits:
Working at the Office:
The CRA will consider an employee to not have received a taxable benefit if:
- the employee continues to work from their regular place of employment during the pandemic;
- the employer pays for, reimburses, or provides a reasonable allowance for commuting costs incurred by the employee during the pandemic; and
- the costs are over and above the employee’s normal commuting costs. This position applies to the use of employer-provided motor vehicles (assuming the employee did not normally commute to work using such a vehicle before the pandemic).
Working from Home:
The CRA will consider an employee to not have received a taxable benefit if:
- the employee works from home because the employee’s regular place of employment is closed; and
- the employer pays for, reimburses, or provides a reasonable allowance for normal or additional commuting costs incurred by the employee to travel to the employee’s regular place of employment for any purpose that enables the employee to perform their employment duties from home. (e.g. an employee travels to the office to pick up certain office equipment)
An employer must maintain appropriate records demonstrating the reasonableness of any allowances in relation to commuting costs.
If an employee uses an employer-provided vehicle, the employee should maintain records indicating the number of kilometres travelled by the employee between his/her home and regular place of employment.
