Working from home sounds simple.
Laptop. Coffee. Sweatpants. Maybe a dog barking during a client call.
But when it comes to claiming home office expenses on your tax return, the rules are a little more detailed.
Employees may be able to deduct work-space-in-home expenses, but only if they meet specific conditions. This is not a “worked at the kitchen table once, claim the house” situation.
Let’s walk through it.
Who Can Claim Employee Home Office Expenses?
Employees may be able to deduct home office expenses if all required criteria are met.
First, one of the following must apply:
- Your employer required you to work from home, either through a written or verbal agreement
- For 2023 and later years, you are considered to meet this requirement if you voluntarily entered into a formal telework agreement with your employer
- You worked from home in 2020, 2021, or 2022 due to the COVID-19 pandemic, but this only applies to home office expenses for those years
You must also have been required to pay for expenses related to your home work space.
However, you cannot deduct expenses that your employer reimbursed.
No double dipping. CRA does not enjoy synchronized swimming in the tax pool.
Your Work Space Must Meet One of These Tests
To claim work-space-in-home expenses, one of the following must apply:
1. You Mainly Worked From That Space
Your home work space must be where you mainly worked, meaning more than 50% of the time, for a period of at least 4 consecutive weeks in the year.
If you had more than one eligible period during the year, you may be able to claim expenses for each period.
2. You Used the Space Only for Employment Work
You may also qualify if:
- You only used the work space to earn employment income
- You used it regularly and continually for in-person meetings with clients, customers, or other people while doing your work
Your expenses must also be used directly in your work.
You Need Form T2200 or T2200S
To claim these expenses, you need one of the following forms completed and signed by your employer:
- Form T2200, Declaration of Conditions of Employment
- Form T2200S, Declaration of Conditions of Employment for Working at Home Due to COVID-19
Form T2200 does not need to be submitted with your tax return.
But you must keep it in your records and provide it if CRA asks for it.
The expenses are detailed and summarized on Form T777, then entered as a deduction from income on line 22900, other employment expenses, of your personal income tax return.
You can only deduct the expenses your employer required you to pay.
Not all expenses are deductible.
The Temporary Flat Rate Method No Longer Applies
For 2023 and later years, eligible employees who worked from home must use the detailed method to calculate home office expenses.
The temporary flat rate method no longer applies.
So yes, this means more recordkeeping.
Your future self may not be excited, but your tax file will thank you.
What Working From Home Expenses Can Employees Deduct?
If the required criteria are met, employees may be able to deduct expenses that were not reimbursed by their employer.
Allowed expenses may include:
- Heat
- Electricity
- Light bulbs
- Cleaning materials
- Maintenance
- A reasonable portion of rent, if the home is rented
However, employees cannot deduct:
- Mortgage interest
- Capital cost allowance, also known as depreciation
The key point is that the expense must relate directly to the work space and employment duties.
What About Travel Expenses?
Travel to your employer’s place of business may be deductible if it was not reimbursed by a tax-free vehicle allowance.
This depends on the situation, so employees should be careful when deciding whether travel costs qualify.
Internet and Cell Phone Costs
Some employers may reimburse employees for internet or cell phone costs.
In some circumstances, the portion used for employment purposes may not create a taxable benefit.
There are a few important points to keep in mind:
- This can affect business deductions, employee taxable benefits, and employment expenses
- Business and personal cell phone use should be documented
- The records should be detailed, similar to a mileage log or trip log for business and personal vehicle use
- GST/HST input tax credits may be affected by cell phone and home internet access costs
- Cell phone costs and office supplies are not considered work-space-in-home expenses
- These costs are claimed in a different section of Form T777
Good documentation matters here.
“Trust me, it was mostly business” is not the kind of tax strategy that ages well.
Sales Commission Employees
Sales commission employees who are eligible to deduct work-space-in-home expenses may also be able to deduct a reasonable portion of:
- Property taxes
- Home insurance
- Monthly home internet access fees
This applies to employees earning commission income who meet the required conditions.
Salaried Employees and Home Internet Fees
For salaried employees, CRA’s guide previously stated that monthly access fees for home internet service could not be deducted.
This was revised on January 29, 2021, for 2020 and later years.
The revised note indicates that reasonable monthly home internet access fees can be included as part of work-space-in-the-home expenses.
Form T777: Statement of Employment Expenses
Form T777 is used to list employment expenses and calculate allowable amounts, including:
- Motor vehicle expenses
- Work-space-in-home expenses
- Other employment expenses
Work-space-in-home expenses can only reduce employment income.
They cannot be used to create or increase a loss from employment income.
If your eligible expenses are more than your employment income, the extra amount can be carried forward and used in the next tax year.
GST/HST on Work-Space-In-Home Expenses
Work-space-in-home expenses include any GST/HST or provincial sales taxes paid.
You may be eligible for a refund of the GST/HST included in the costs through the employee and partner GST/HST rebate rules.
This is one of those details that can be easy to miss, but it may matter.
CRA Reviews and Reassessments
CRA may review or reassess home office expense claims.
This is why documentation is so important.
If you are claiming expenses using the detailed method, keep strong records of your expenses.
That means keeping:
- Receipts
- Calculations
- Employer forms
- Proof of work-from-home arrangements
- Notes supporting how you calculated the employment-use portion
Tax Tip: Keep awesome documentation if you are claiming the detailed method.
Yes, “awesome documentation” is a technical accounting term. At least around here.
Home Office Expenses for 2021 and 2022
The Home Office Expense Deduction was extended and enhanced for the 2021 and 2022 tax years.
For those years:
- The deduction was available for 2021 and 2022
- The flat rate maximum increased to $500 per individual per year
For 2023 and later years, employees must use the detailed method if they are eligible to claim home office expenses.
Final Thoughts
Employee home office expense claims can be valuable, but they are not automatic.
To claim them properly, you need to confirm:
- You meet the eligibility rules
- Your employer required you to pay the expenses
- You have the correct signed form
- Your expenses were not reimbursed
- Your calculations are reasonable
- Your records are strong enough to support the claim
The big takeaway?
Working from home may save you a commute, but it does not save you from paperwork.
