The special Work-From-Home deduction relating to Covid-19 came into effect for the 2020 tax year and continued until the end of the 2022 tax year. Let’s recap what this deduction does and how to claim it.
The Covid-19 Work-From-Home Deduction
As a consequence of the Covid-19 pandemic, the Canadian government allowed a special Work-From-Home deduction for employees who were forced by Covid to work from home during the 2020-2022 tax years. Its purpose is to reimburse people for some of the overhead costs of the portion of their home used as a home office. The claim is made using form T777s in the income tax package. Note that there are two versions of T777. The Covid-related deduction is on T777s (‘S’ is for Short, distinguishing it from the regular T777, which is more complex.
(Note: The Work-From-Home deduction is similar to the business-use-of-home deduction available to self-employed Canadians, but it has some key differences.
The Simplified Flat Rate Calculation
The standard Work-From-Home deduction has existed for years to apply to small subset of employees. The Covid version is simplified and streamlined so as to be easier to apply to the broad range of workers affected by Covid restrictions. Anyone who worked from home as a consequence of Covid-19 restrictions can simply deduct a flat $2/day for every day they worked from home, to a maximum of 200 days in 2020 ($400), or 250 days in 2021 or 2022 ($500).
No additional documentation or proof is required by the taxpayer to take this deduction.
The Detailed Calculation
The second way to calculate the Covid Work-From-Home deduction is the detailed method, where allowable overhead expenses are totalled for the year, and a fraction is taken as the deduction. The fraction takes into account the proportion of the home’s square footage that made up the home office, and also the fraction of time that the space was used as a home office vs how much of the time it reverted to personal use.
For example, say a person used their living room as a workspace five days per week (i.e., 5 days out of seven), for eight hours per day (i.e., 8 hours per 24-hour period). If the living room took up 30% of the home, the person would be able to write off 30% x (5/7) x (8/24) of their rent.
In some cases, this calculation will give a larger deduction than the flat rate calculation. However, unlike the flat rate method it does require documentation: the employee needs their employer’s signature on form T2200s. Note that this is the form ending in ‘S’ for Short, to distinguish it from the regular T2200.
Which calculation to choose?
The Flat Rate calculation
Pros: easy to do; requires no documentation
Cons: may not give as large a deduction as the Detailed calculation
The Detailed calculation
Pros: may give a larger deduction*
Cons: more work; requires signed T2200s from the employer
* One note about the Detailed calculation: it tends to be significantly better for people who rent their homes, but not much better for people who own their homes. This is just a side-effect of the limitations on what can be included in the Detailed calculation. If you own your home, it’s probably not worth the extra work to get the T2200s and do the detailed calculation.
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