23 February, 2021

Breaking down Home Office Expenses for Tax Season 2021

HR Knowledge - Melanie Cochrane

Tax season is upon us and given the mass move to remote work over the course of 2020, some tax rebates might be available to you and your employees. Our CFO, Melanie, has prepared a quick guide for what you need to know – from both the employer and employee perspective. Check it out below!

Let’s start with the T2200s Form

What is it?

Provided by the employer, this form essentially declares that the employee worked from home more than 50% of the time for a period of at least 4 consecutive weeks in 2020 due to the pandemic. This form would not apply to expenses outside of home office expenses, use a T2200 instead.

Employees aren’t required to attach this form to their tax return but should hold onto a copy in case the CRA needs a copy later

Calculating your Home Office Expenses (T777S form)
Option 1  – Flat Rate 

A temporary flat rate of $2 for each day you worked from home in 2020 due to the COVID-19 pandemic, up to a maximum of $400 to cover all your home office expenses.

When to use it?

You may use this method to calculate your home office expenses if you worked more than 50% of the time from home for a period of at least 4 consecutive weeks in 2020 due to COVID-19.

How to calculate it?

Take the total number of days worked from home from March 16 to December 31st and multiple by 2, this will be your employment expense.

Example: 

Alex worked from home from March 16 – June 30 = 57 home days.

For July – December, he did a combination of working from home, some days in the office, and visiting customers = 98 days home days. Total 155 days, $355 employment expense.

Option 2 – Actual Home Office Expenses 

Actual home office expenses you paid while working at home due to the COVID-19 pandemic, and you have supporting documents.

Eligible Expenses include Rent, utilities (hydro, water, gas, utilities, a portion of condo fees), R&M (minor repairs, cleaning supplies, light bulbs, paint), Home Internet access fees, office supplies (stationery items, pens, sticky notes, ink), Employment use of basic cell phone service plan, Long distance calls for employment purposes)

Non-eligible expenses include Mortgage principal or interest, property taxes & insurance, major repairs (replacing windows, flooring, furnace), Office furniture, equipment, electronics, landline phone service, internet set up or hardware fees, expenses reimbursed by the employer

Example – Rental 

  • Bella rents a 2 bedroom apartment and uses one of the bedrooms as her home office. She has calculated her office to be 160 sqft of the 800 sqft apartment = 20% of the apartment
  • Bella worked from home for 200 days or 55% of the year
  • Her eligible annual expenses are as follows
    • Rent: $18,000
    • Utilities (hydro & water): $1,200
    • Internet: $600
    • Maintenance: $360
    • Total: $20,160
  • 20% Home office: $4,032
  • 55% of expenses for Employment Use: $2,218 
  • Deduction Amount: $2,218 

Example – Home Owned 

  • Chris owns a 3 bedroom house and uses 1 bedroom as the home office, the office is 180 sqft of the 1800 sqft house = 10% of the house
  • Chris also worked from home 200 day or 55% of the year
  • His eligible annual expenses are as follows:
    • Utilities (hydro, gas & water): $3,600
    • Internet: $600
    • Maintenance (furnace repair, supplies, cleaning service): $810
    • Total: $5,010
  • 10% Home office: $501
  • 55% of Expenses for employment use: $276 
  • Other office Expenses: $516 
  • Deduction amount: $792 

Depending on your living situation and shared expenses your calculation may vary as well.

What to do next?

Start compiling your expenses so you can get a ballpark and determine which option is best for you.

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