Many Canadians may be eligible for work-space-in-the-home tax deduction due to COVID-19: expert

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Ottawa — A months-long COVID-19 lockdown means the majority of Canada’s workforce that has transitioned from an office space to a makeshift remote set-up could be eligible for a work-from-home tax deduction.

A tax expert with CIBC told CTVNews.ca that "hundreds of thousands, if not millions" of Canadians will be able to apply for the "work-space-in-the-home" deduction, similar to the one that applies to the self-employed.

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.

Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth Management, says 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," he 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.

The CRA reported that 174,210 Canadians applied for the work-space-in-the-home deduction for the 2018 tax year, which accounted for $271,866,000 or an average of $1,561 per person.

EMPLOYER BUY-IN

Under current rules, employers have to formally sign the T2200 tax form declaring that they require employees to work from home. Golombek says this could be a paperwork nightmare for companies as pandemic rules required the majority of employees to work remotely.

"Do we really need the employer to sign what could be millions of T2200s? Hopefully the answer to that is no. There are some cases in the past, where the employer hasn’t signed the form that haven’t been fatal."

He says he’s hopeful the CRA issues a "technical interpretation" in the fall, outlining the limitations of the work-space-in-the-home tax deduction, while taking into consideration the workplace impact of the pandemic.

Golombek also advises that workers at home hold onto their receipts for expenses including rent, hydro, and office supplies they’ll be required to provide when filing tax returns next year.

"Really the receipts are not complex if you’ve got everything online. You just have to be organized."

WORKPLACE CULTURE SHIFT

In its May Labour Force Survey, Statistics Canada said 4.9 million Canadians worked at least half their usual hours at home. That’s up from about 3.3 million midway through April.

The June report shows a continued rise in work outside the home.

"Among those who were employed and worked at least half of their usual hours, working at locations other than home increased by 2 million in June, while the number of Canadians working from home fell by 400,000," the report reads.

Nevertheless, there’s a notable shift among employers to encourage their staff to stay home if they can, for the foreseeable future.

Twitter’s CEO Jack Dorsey, Facebook’s CEO Mark Zuckerberg, and Canada’s own Tobias Lütke, CEO of Shopify, have all indicated that they intend to establish fully remote workplaces.

"Given the option, many people, assuming they’ve got adequate child care, would love to work from home in terms of the flexibility, in terms of the time of commuting," said Golombek.

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