New CRA rules around work from home make it harder to claim expenses

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If you happen to’re one of many tens of millions of Canadians who worked from home throughout 2023, both full time or on a hybrid-work association, you’ll have to take some further time this tax submitting season if you wish to declare a deduction to your home-office bills. That’s as a result of the “simplified technique” of claiming home-office bills is now not out there for the 2023 tax 12 months.

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You might recall that on account of the widespread work-from-home preparations that started because of the COVID-19 pandemic, the Canada Revenue Agency (CRA) launched a simplified technique for workers to say home-office bills.

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Underneath this technique, which was out there for the 2020, 2021 and 2022 tax years, you didn’t have to trace your precise home-office bills. As a substitute, workers might declare $2 per day for as much as 250 days, or $500 ($400 for 2020), as employment bills. No receipts or proof of your expenditures was wanted, and, most importantly, no CRA kind was wanted out of your employer to certify your work-from-home association.

However for the 2023 tax return, which is usually due on April 30, 2024, workers who want to declare home-office bills must undergo the tedious train of tallying all their bills, prorating them after which claiming the suitable quantity as a deduction on their 2023 returns.

Right here’s a fast information to the home-office expense guidelines for workers, which bills qualify and the way the calculation is meant to be executed primarily based on the newest steerage launched by the CRA earlier this month.

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To be entitled to deduct home-office bills, you have to be required to make use of part of your house for work. The CRA has confirmed that the requirement to take care of a house workplace needn’t be a part of your formal contract of employment; moderately, it will likely be ample if there’s a verbal or written settlement.

The CRA not too long ago clarified that in the event you voluntarily entered a work-from-home association along with your employer, the company will take into account you to have been required to make money working from home for tax functions, even in a hybrid-work arrangement.

For the 2023 tax 12 months, the CRA has said you can be certified to write down off your home-office bills if your house workspace is the place you “principally” — that means greater than 50 per cent of the time — carried out your duties of employment for a interval of not less than 4 consecutive weeks throughout 2023.

For instance, in the event you’re in a hybrid-work association that has you go into the workplace on Tuesdays and Wednesdays (or 40 per cent of the time), this situation can be happy since you might be working from house the opposite three out of 5 weekdays (60 per cent).

Your workspace is usually a designated room that’s used just for work, or it may be in a standard space that has different functions, akin to a kitchen desk the place you sit throughout working hours.

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To have the ability to make a declare for 2023, you’ll have to get a signed copy of CRA kind T2200- Declaration of Conditions of Employment out of your employer. The T2200 will not be submitted along with your return, however you’re required to maintain it in case the CRA asks to see it later.

You’ll be able to declare quite a lot of home-office bills, akin to the price of utilities, lease, upkeep and minor restore prices, and residential web entry charges. You usually can’t deduct mortgage curiosity, property taxes, house insurance coverage, capital bills (akin to altering a furnace or home windows) or depreciation (capital price allowance).

Which means the price of a brand new, ergonomic workplace chair isn’t tax deductible, neither is the price of a big, widescreen monitor, each of that are thought-about capital bills. The price of most traditional workplace provides, akin to printer paper, ink, pens and sticky notes, are additionally deductible.

Fee-based workers who promote items or negotiate contracts can declare some bills that salaried workers can not, particularly: house insurance coverage, property taxes and the prices to lease a cellphone, pc, laptop computer, pill, and many others., that relate to incomes fee revenue.

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For utilities, lease and different house bills, it’s good to allocate the bills on a “cheap foundation” to find out the portion associated to employment use. That is sometimes executed by dividing the world of the workspace by the whole completed space (together with hallways, bogs, kitchens, and many others.) of the house. You’ll be able to’t embrace bills associated to part of a house that was not used as a workspace, akin to the price of repainting a bed room the place you didn’t work.

The house-office expense deduction is calculated primarily based on eligible home-office bills, the share of the house’s space that’s used for a house workplace and, for a shared house such because the kitchen desk, the period of time labored from that house. To make your declare, you’ll want to finish CRA kind T777 Statement of Employment Expenses, and file it along with your revenue tax return.

If you happen to labored from house for under a part of the 12 months, you’ll be able to solely declare bills paid for the a part of the 12 months that you just labored there not less than 50 per cent of the time for not less than 4 consecutive weeks.

Edward Rajaratnam, Canadian observe lead accomplice with Ernst & Younger’s (EY) international employment tax companies group, has been fielding quite a few questions from employers on the brand new guidelines for 2023, and the logistics of finishing T2200s for a number of workers.

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“I’m dissatisfied that the principles didn’t come out earlier,” he mentioned, noting that employers at the moment are scrambling to place in place processes to get T2200s within the fingers of qualifying workers in time for private tax submitting season.

EY has held two webinars over the previous month to offer related and well timed data on the brand new T2200 guidelines to the enterprise neighborhood. It has additionally developed service options to assist ease the executive burden of employers on the lookout for help in finishing the T2200s for tons of of workers — or 1000’s in some circumstances — that will not have the sources to do the work internally.

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Non-public Wealth in Toronto. Jamie.Golombek@cibc.com.

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