Three years into the COVID-19 pandemic, tons of of 1000’s of Canadians are nonetheless working remotely from house or partaking in a hybrid work mannequin. In early 2022, practically half of all employed Canadians labored from house for no less than some days, in accordance with a survey performed by the Environics Institute for Survey Analysis.
With tax season underway — the deadline for many Canadians to file their tax returns is Might 1 — many Canadians could also be eligible to obtain as much as a $500 tax deduction via the federal authorities’s short-term flat price methodology house workplace bills declare.
The deduction is supposed “to offset the prices an worker would incur by working from house as a substitute of working at a spot the place these necessities are supplied,” defined Janet Grey, an authorized monetary planner with Cash Coaches Canada.
Right here’s what that you must find out about this house workplace bills declare, together with suggestions from two specialists on how distant and hybrid employees can profit from the tax deduction.
What counts as working from house?
Canadians are eligible for the tax deduction, beneath the “short-term flat price methodology,” in the event that they labored from house greater than 50 per cent of the time for no less than 4 consecutive weeks in 2022. Sick days, trip days and different days off, nonetheless, can’t be counted towards the declare.
Let’s take this instance: Genevieve is a full-time employee. In January 2022, she labored from house three days every week and went into the workplace twice every week. For the remainder of the 12 months (from February to December), she went into the workplace 4 instances every week and solely labored remotely as soon as every week.
Genevieve is eligible to make a declare beneath the short-term flat price methodology as a result of she labored from house greater than 50 per cent of the time for 4 consecutive weeks.
How a lot am I eligible to obtain?
Underneath the short-term flat price methodology, eligible employees can obtain $2 for every day they labored from house, as much as a most of $500 or 250 days. The utmost declare per particular person was beforehand $400 in 2020 however was raised to $500 for the 2021 and 2022 tax years.
How do I apply for the tax deduction?
As soon as they’ve confirmed their eligibility, employees could make a declare beneath the short-term flat price methodology by utilizing “Possibility 1 — Non permanent flat price methodology” on the T777S type. Claimants should then enter the quantity from that type on their earnings tax return.
Most employees who use a tax software program to file their earnings taxes will likely be prompted to say this deduction, famous Barry Choi, a private finance professional and blogger at Cash We Have.
Underneath the short-term flat price methodology, staff don’t have to maintain supporting paperwork nor have their employer full a signed type.
What’s the distinction between the short-term flat price methodology and the detailed methodology?
The short-term flat price mannequin is a simplified system created in response to the pandemic, whereas the detailed methodology predates COVID-19.
As its identify suggests, the short-term mannequin is a flat price deduction primarily based on the variety of days staff work remotely from a house workplace. The detailed methodology, nonetheless, permits staff to say the precise quantities incurred by working from house.
Although the detailed methodology might lead to a larger tax deduction, it typically requires extra time to finish, famous Grey, including that staff who select this methodology should additionally maintain receipts and supporting paperwork for every declare, in contrast to the short-term flat price mannequin. Staff will even want their employer to log out on a separate type (varieties T2200S or T2200) to undergo this methodology.
What different bills can I declare if I make money working from home?
Bills staff can declare beneath the detailed methodology embody electrical energy, warmth, water house web entry and a “affordable portion” of lease. As well as, fee staff may also declare deductions for house insurance coverage, property tax and the lease of electronics associated to incomes their fee earnings.
“For somebody who works from house that will have extra extra bills and is claiming not simply their house web, but in addition their lease or utilities, perhaps they’ve performed the mathematics and it makes extra sense to do the detailed methodology as a result of they will get extra money again,” defined Choi.
What if I’m self-employed?
Self-employed employees shouldn’t apply beneath the short-term flat price or detailed strategies, however fairly use the business-use-of-home bills declare (type T2125), stated Grey.
“You possibly can declare much more bills since you’re self-employed,” she stated, “And also you don’t you don’t want anybody (else) to log out on it.”
Via this methodology, for instance, employees can deduct a part of their mortgage curiosity from their taxable earnings, whereas they can not accomplish that beneath the house workplace expense declare.
All through the pandemic, many Canadians turned to entrepreneurship or self-employment. A June 2022 examine by Intuit QuickBooks discovered that one in 4 Canadian small companies had been began throughout the pandemic. Whereas taxes are sometimes extra sophisticated for self-employed entrepreneurs and gig employees in comparison with salaried staff, they might be entitled to extra tax deductions and advantages.
What’s a tax deduction, and the way does it differ from a tax credit score?
Each strategies of the house workplace expense declare are utilized as tax deductions. Put merely, “a tax deduction lowers one’s taxable earnings, whereas the tax credit score offsets taxes general,” defined Choi.
In different phrases, a tax deduction reduces the quantity of earnings that’s taxed, which reduces the earnings tax general. The precise financial savings for every individual will likely be decided by the tax price.
A tax credit score, in the meantime, reduces the quantity of earnings tax paid.
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