What Is the Work From Home Tax Credit?
When you work from home there are certain tax credits available to you that aren’t available to people working in an office. For Canadian remote workers, these include deductions for a reasonable percentage of your rent, maintenance, internet, business phone calls, and employment expenses you incurred that haven’t been reimbursed by your employer.
Because so many people have spent time working remotely during the pandemic, the Government of Canada introduced the Flat Rate Method to claim work from home expenses.
Who Qualifies for the Work From Home Tax Credit?
Canadian remote workers who spent 50% of their time working from home for a period of at least four weeks in 2023 can claim the work from home tax credit. Both full-time and part-time workers are eligible to receive the credit. Sole proprietors and incorporated contractors are not eligible for this specific credit, as they can write off home office expenses as part of their normal business expenses.
There are two ways to calculate your tax credit, the Flat Rate Method and the Detailed Method.
The Flat Rate Method for Work From Home Expenses
If you were moved from in-office to at-home working in 2022 due to Covid-19, you can file for a $2 a day in work from home expenses, up to a maximum of $500, without submitting a detailed breakdown. To qualify, you must meet all the eligibility requirements. According to the CRA, these requirements are that
- You worked from home in 2022 due to the COVID-19 pandemic or your employer required you to work from home
- Have a completed and signed Form T2200S or Form T2200 from your employer (only applicable if the detailed method is used to complete the claim)
- The expenses are used directly in your work during the period
Keep in mind that days off, including schedule time off and weekends, sick days, vacation days, and holidays should not be included in your calculations.
The CRA has provided a calculator to help you understand what you can and cannot claim, and form T777S has been designed with newly remote workers in mind. It will guide you through both the simple and detailed methods.
If you are claiming more than the simple method accounts for, you should follow the detailed method. You should also request a T2200 from your employer, which details expenses both reimbursed to you as taxable and nontaxable, as well as any allowances you had.
Long-term remote workers, who weren’t switched to remote due to the pandemic, do not qualify for the simple method and should follow the normal process of calculating and claiming your at-home expenses.
The Detailed Method for Work From Home Expenses
If you worked from home during 2023 on a permanent basis, or your business expenses exceed the flat rate maximum, the detailed method of calculating your work from home tax credit may be more useful. The detailed method is the pre-pandemic method to receive a tax credit and can be used by any type of remote worker. Long-term remote workers should therefore get used to the detailed method!
The detailed method allows you to claim the actual amount of your business expenses. However, in order to do so, you must keep meticulous records in case of an audit. Use the CRA calculator to understand what expenses are eligible and how you should claim them. You will also need a signed T2200S or T2200 from your employer.
