March 4, 2021
Ottawa has come up with a simpler way to claim expenses for that spare room or corner that became a makeshift office last spring when pandemic lockdowns went into effect across the country.
In addition to the detailed method for claiming home office costs, the federal government announced a new temporary flat rate method last year with the specific aim of making taxes a little easier in these trying times.
Experts say the new flat rate method is quick and easy, but using the detailed method may yield a better outcome, depending on your circumstances and it is worth checking out both ways to make sure you’re getting the best deal.
Edward Rajaratnam, executive director at EY Canada, said the detailed method may be better for renters than homeowners because of their ability to claim a portion of their rent, which could increase the size of their deduction beyond the $400 cap placed on the flat rate option.
However, he said, the temporary flat rate method is simpler as the name would imply.
“The beauty of this is it is a flat rate, it is $2 a day up to a maximum of $400 and the second beauty of that is that you actually do not need to maintain receipts,” he said.
“Everybody who has been working from home, they have been busy with work, so just imagine them trying to find receipts.”
You don’t get to count days off, vacation days, sick leave days or other leaves of absence, so you might not reach the 200 days needed to max out the flat rate claim of $400. However, they don’t have to be full days of work to qualify. Even if you only worked part of the day, you can claim the $2 for that day.
While the flat rate method is easy, Gerry Vittoratos, national tax specialist at UFile, says you still should ask your employer to complete the Canada Revenue Agency form that allows you to use the detailed method if it turns out to yield you a better return.
“You might get more if you go with the detailed method, don’t prevent yourself from claiming that,” Vittoratos said, noting that CRA has simplified the forms this year to make it easier for companies to provide them for employees.
“Do the comparison between the two and see which one is better for you. It might turn out the detailed method is a lot better.”
To qualify under both methods you need to have worked more than 50 per cent of the time from home for a period of at least four consecutive weeks in 2020.
Unlike the flat rate method, The detailed method requires a thorough accounting of actual expenses which need to be supported by receipts. But, unlike the flat rate method your total deduction is not capped at $400, so you could end up saving more.
Eligible expenses include things like office supplies but also a share of expenses such as utilities, home internet access fees, maintenance and minor repairs. Renters can claim a potion of their rent, but homeowners cannot claim mortgage payments.
You cannot claim expenses for which you were reimbursed by your employer.
If you’re using the detailed method and looking to claim some of your utilities or rent, you’ll need to figure out how much of your home was used for work.
If you had a spare room that became your designated office, the proportion that you can claim is the same as the proportion that space takes up in your house. So if your spare bedroom turned office makes up 10 per cent of the square footage of your home, then you get to claim 10 per cent of expenses like utilities for the time you spend working at home.
But the calculation becomes more complicated if you were using your kitchen table or dining room, spaces that also served another purpose in your home in addition to a workspace as you can only claim for the time the space was used for work.
Vittoratos says if you’re considering using the detailed method it is important to know how big your home is and what proportion was used for work, as your accountant will need it to figure out what is best for you.
“Have all the information in front of you. Make sure that everything is in order so you get the maximum return possible,” he said.
Rajaratnam noted that the flat rate deduction is per individual. So if you live with someone and you both worked from home you could both make a flat rate claim.
“If you and your spouse are both working from home ... both of you can claim $400 each and you do not need to show expenses, as long as you have been working from home,” he said.
However, he says, everybody needs to consider their own circumstances to figure out what is best for their tax return.