Pattie Lovett-Reid: Tax breaks for those working from home
TORONTO -- Entrepreneurs have always been very aware of the tax advantages of working from home. However, the pandemic has shone the spotlight now on employees working from home, especially with corporations not in any hurry to get employees back into the office tower.
Home offices have been sprouting up and the responsibility of the office employee to create a home work environment has resulted in a new tax-saving opportunity they have not qualified for in the past.
It isn't just about setting up the office. If you had to buy supplies, a computer, desk, office chair, repairs to create a functioning office space all of these expenses could be deducted from your income. As well, a reasonable portion of utilities based on the square footage of your home can be deducted and that would include utilities such as water, heat and electricity.
The key here is that you have to be reasonable. This can add up very quickly and can also help to reduce your tax bill.
Tax experts have made it clear -- this is still a grey area for CRA as more immediate needs are the focus -- CERB and the wage subsidy program -- but the day will come where there will be a surge in home office claims and the guidelines will be clearer.
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For now, the savvy are keeping tabs on the money being spent once home operations commenced. It could get a little complicated if we start to shift between the home office and workplace as home office expenses are only eligible if the home is used as your workspace half the time. The 50% rule applies to the taxation year.
However, CRA may make exceptions due to the unique nature and immediate response of working from home due to the pandemic. This is the grey area I expect further clarification on.
Companies have been reaching out to employees working from home offering up office furniture, computers, a one-time cash bonus and even reimbursement for internet services. Anything received from your employer is not eligible for a claim.
Now is the time to set up your files for the 2020 taxation year. As time progresses we will get more clarity on what can and can't be deducted, so for now keep meticulous records, track your time working between your home and the office and recognize potential "red flags".
CRA has limits about what you can deduct for your home office. For instance, let's say your home office takes up 15% of your space at home, then you can claim 15% of the utility costs I mentioned but you can't deduct 15% of your mortgage for example. Going too far will absolutely result in a tax audit.
It is an unusual year due to COVID-19, so my best piece of advice is for you to talk to a tax expert so you don't leave any money on the table.