Work-From-Home Income Tax Deductions For 2020 Tax Year: It’s Complicated

Millions of Canadians were required to work from home for a significant part of the year in 2020. They may be able to claim a work-from-home deduction for their 2020 tax year income taxes. While this tax deduction for self-employed people is fairly straightforward, it gets more complicated when the taxpayer claiming the deduction is not self-employed, but was required to work from home due to the COVID-19 pandemic.

Do You Meet the Requirements?

CTV News explains, “Eligible applicants must meet one of two conditions: demonstrate that their home was their principal place of work or where they worked for 50 per cent of the time during the tax year, or that they used their home office solely for income purposes and regularly hosted clients or customers there… The 50-per-cent threshold is only required for "office space expenses" such as rent, utilities, and maintenance. Those who are non-eligible can still claim expenses on supplies.”

Will the Canada Revenue Agency Adjust the Rules?

How the Canada Revenue Agency (CRA) interprets the rules, and if they make any exceptions or create any relaxations due to the pandemic is still to be seen. As noted by CTV News:

Questions remain about how the Canada Revenue Agency (CRA) will interpret the rules during the pandemic shutdown.

"During these three months when people have been at home, I would argue that is where they principally performed their duties," [Jamie Golombek] said. "Will the CRA be lenient and say 'you’ve been working 100 per cent of the time at home, your home office where you principally did your work, therefore for those months, you should be allowed to claim home offices expenses?'"

Or he said, the CRA may look at cases from an annual perspective, as per the norm, and suggest that because people returned to work after a few months they aren’t eligible. 

Looking For Direction From the CRA

Hopefully we will see some direction from the CRA soon for all the people who might be able to claim a work-from-home deduction next year. The best advice I’ve seen is for people to keep receipts in order now with an eye to possibly making a claim next year, in anticipation of the CRA allowing this deduction. Another thing to keep in mind is that this may be the future of working for a lot of people – you might want to claim work-from-home expenses in the future as well.

Here is a video giving a good overview of the work-from-home deduction question: https://www.youtube.com/watch?v=IDyTFTo9qSA

Shaw & Associates Can Be Your Guides

Shaw & Associates is keeping current with all the changes happening with the CRA and accounting/tax regulations; we would love to sit down with you and keep your business well-advised about the tax and accounting implications of all the changes that are happening.

Contact Shaw & Associates Chartered Accountants for accounting help you can count on. One complimentary meeting with us will put you and your business on a more profitable and positive path.