Work Space in the Home for Typical Employees
Each of COVID-19, technology, and modern business practices, have led to a significant rise in, especially, office employees working from home all or some of the time.
This leads to a question: as an employee, will the Canada Revenue Agency (CRA) allow me to claim some home expenses as an employment cost, which will therefore reduce my taxes?
The answer: that depends. Firstly, does your contract of employment (whether written, verbal, or through required practices) require you to maintain a home work space? For many employees, the answer is a resounding “yes.” Many employers have closed physical offices during the pandemic, increased distancing needs or otherwise just generally shrunk office work space. All of this means that many employees are now required to maintain a home work space.
So, assuming you meet the above condition, then you must also answer yes to one of the two following conditions:
- The work space is where you mainly (more than 50% of the time) do your work; OR
- You use the workspace ONLY to earn your employment income AND use it on a regular and continuous basis for meeting clients, customers, or other people, for employment duties. (Whether Zoom or phone meetings counts is an open question, but we assume that the CRA will follow common sense about current business practices and allow those meeting types to qualify).
If you qualify as per above, then you can deduct the pro-rata expenses of your workspace area, relative to the total finished area of the home. The following expenses qualify for deduction:
- Property taxes
- Home insurance
- Rent for your house, townhouse, or apartment
However, you cannot deduct mortgage payments, mortgage interest or capital cost allowance (depreciation). Also, note that maintenance expense cost claims are limited to the general maintenance of the home or specific maintenance of the workspace. If there was, for instance, a significant renovation to the kitchen, you would not be allowed to deduct any of those costs (unless you were, for example, using that space as a professional chef). Note that if you are a commission employee, that additional deduction may be available for you.
Lastly, if your employer only required you to work away from the office for part of the year, then you would have to adjust those expenses proportionally by pro-rata-time as well.
To be able to claim these expenses, you will need your employer to fill out the T2200 form paying particular attention to Sections 1 and 10. Neither you nor your employer needs to file this form with the CRA but, just like the expense receipts, you must retain it in case the CRA asks to see it.
In summary, significant tax savings may be possible.