CRA $400 Tax Deduction

The COVID-19 pandemic has transformed home offices into corporate HQs, dining tables into board rooms, and personal cell phones into work lines. If you were impacted in this way, you may be eligible to claim a $400 tax deduction from Canada Revenue Service (CRA). Here’s what you need to know.

WHAT IS THIS $400 TAX DEDUCTION?

Geared at employees who’ve had to work from home due to the pandemic, this CRA deduction is officially known as the “temporary flat rate method” for simplifying home office expense claims.

What’s new and unique about this deduction is its easy, flat-rate, no-questions-asked approach: if you meet the eligibility criteria, just claim it! There’s no need to calculate the size of your WFH space, collect supporting documents like receipts, or get a Form T2200 from your employer.

This $400 tax deduction will reduce the amount of income you report, therefore reducing your tax liability in 2020.

WHO QUALIFIES?

Canadian employees can use the temporary flat rate method if they meet ALL the following criteria:

•  You worked from home due to the COVID-19 pandemic;

•  You worked from home more than 50% of the time, for a period of at least four consecutive weeks;

•  You’re claiming home office expenses only – not any other employment expenses;

•  Your employer didn’t/isn’t going to reimburse you for all your home office expenses. (You can still apply if they partially reimbursed you.)

Need more details? Find them here.

WHAT’S COVERED?

The following types of home office expenses are covered:

•  Rent;

•  Electricity;

•  Internet access fees;

•  Office supplies (for a full list of what’s deductible – see CRA’s website);

•  Cell phone minutes (attributable to work calls).

The simplicity factor of the temporary flat rate method is that you don’t have to itemize your expenses or provide documentation to claim your $400 tax deduction.

IS THIS THE RIGHT TAX DEDUCTION FOR ME?

Ultimately, that’s up to you:

If your home office expenses were $400 or less, or if you’d prefer a simplified method of claiming these expenses, the temporary flat rate method is best for you.

But if your office expenses were greater than $400, it may be better to claim the actual amount that you paid, using the “detailed method” of calculations.

The detailed method will require that you break out expenses between the employment use and personal use of your home. You will also have to get a completed and signed T2200 or T2200S form from your employer. Salaried and commission-earning employees qualify for different office expenses. Learn more about the detailed method here.

BOTTOM LINE

This temporary change to CRA requirements has been designed to help Canadians navigate the work impacts of the pandemic. As we all know, when it comes to comes to tax returns, simpler is always better.

For more details on this and other tax tips, check out the CRA’s Tax Tips for 2020.