$5.2 billion in home office expenses claimed last tax season

Taxpayers claimed $5.2 billion in home office expenses in 2022, according to data provided to Advisor.ca by the Canada Revenue Agency (CRA).

About half of that was claimed using the standard method, with the remainder claimed using temporary methods available for employees working from home due to Covid-19 — methods that are no longer available for the 2023 tax year.

In 2022, taxpayers claimed about $2.9 billion of home office expenses using the T777; $1.5 billion using Form T777S: Statement of Employment Expenses for Working at Home Due to Covid-19 through the detailed method; and $840 million on the T777S through the flat-rate method.

The T777S is not available for 2023. Instead, taxpayers must obtain Form T2200: Declaration of Conditions of Employment from their employer and submit Form T777: Statement of Employment Expenses with their tax return.

An employee must be required to work from home as a condition of their employment, more than half the time for at least four consecutive weeks in a year, to be eligible to claim employment expenses. Employees can’t claim expenses the employer has already paid. Employees claiming home office expenses need not file the T2200 with their return but must provide one if the CRA asks.

On Feb. 2, the CRA issued updated guidance for 2023 indicating an employee would have been required to work from home if they did so voluntarily under a “formal telework arrangement with their employer.” The arrangement could be written or verbal.

Edward Rajaratnam, tax partner with EY Canada in Toronto, said the CRA’s latitude in this regard could represent a significant loss of tax revenue.

The CRA has not provided guidance for claiming home office expenses for 2024 and subsequent years, but “guidance for claiming employment expenses will remain consistent with the 2023 tax year, unless there are significant changes in legislation,” said Aaron Martin, a spokesperson for the CRA, in an email.

A spokesperson for the Department of Finance did not directly answer questions on whether the government was considering changing legislation governing employment expenses.

Before 2020, two main types of employees claimed employment expenses: those in a commissioned sales role and those who had a permanent arrangement with their employer to work from a home office.

When many employees began working from home because of Covid-19, the CRA allowed employees to choose between a temporary flat-rate method and a detailed method, depending on the size of the deduction they expected to receive. Both methods were available from 2020–2022 in addition to the standard method.

The detailed method required taxpayers to obtain a From T2200S: Declaration of Conditions of Employment for Working at Home Due to Covid-19. The flat-rate method allowed taxpayers to claim up to $400 in employment expenses in 2020 and up to $500 in 2021 and 2022, without having to obtain a T2200S.

The CRA has issued a simpler T2200 for 2023, but the T2200S is not available for 2023.

The CRA couldn’t provide the amount of home office expense Canadians claimed in 2022 it ultimately determined to be eligible. Nor is the CRA able to estimate the amount of home-office expenses it expects Canadians will claim for 2023.