If you’ve been working from home since mid-March, you may be wondering if there are expenses you can claim on your taxes that you weren’t able to claim before. We are fielding a number of inquiries about this and the short answer is unfortunately no.
The longer answer is ‘it’s complicated.’ Everybody’s situation is a little different, which makes it a challenge to easily figure out how you can shoehorn your situation into CRAs rules.
The CRA doesn’t have a lot of room for flexibility in its rules. Whether it’s due to an antiquated system (for instance, most of their rules don’t have an expectation of digital storage, they don’t normally allow electronic signatures for tax returns and they only begrudgingly accept digital copies of certain documents) or the fact that there need to be hard and fast rules for consistency from coast-to-coast, the CRA is not an organization that can quickly pivot when circumstances change.
The rules for people who are self-employed are pretty clear. The rules dealing with expenses salaried people can deduct are meant to deal with permanent situations, such as someone who works remotely doing site inspections across the province. They need a cellphone for their job, but the employer is not paying for it.
There are three important things to know if you’re a salaried employee and you think you can deduct certain expenses:
- If you’re ever going to be able to claim something, you need a receipt for it. If you don’t have the receipt (digital or paper) you won’t be able to deduct it. Period.
- Your employer needs to fill out a T2200 form. This is a condition of employment form. The employer has to specify what the employee needs and what the employer is paying for. The CRA may change this, but as of July 2020, this rule still applies.
- Employees claiming expenses consistently raises a red flag for the CRA. If you claim employment expenses, there is a high chance you’re going to be audited.
You may have had to buy a few items to furnish your home office, but unless your employer insisted you need them, they’re not likely a deduction. You can’t magically transform your existing stuff (cell phone, internet plan) into a business expense. If you didn’t have a cellphone before and you need one now, you may be able to claim it, but you’ll have to be able to prove it.
The good news is that you may now be able to claim expenses such as heat and hydro. You’re limited to the percentage of the home that’s used for business, which may be as little as 15%. Once people go through this exercise, they usually find the amount they can claim is not significant and with the risk of being audited, may not be worth it. You can’t claim mortgage insurance or property tax because those costs haven’t changed.
One thing that has changed for the better is that your employer can give you up to $500 as a one-time payment to cover the costs associated with working from home due to COVID-19 on a tax-free basis. To they extent they did that, you won’t be able to claim the things they paid for on your taxes.
If you have any questions about what you can and cannot claim, please get in touch!