Employees working from home by choice can claim expenses, CRA says

Employees who worked from home by choice last year under an agreement with their employer will be able to claim employment expenses on their tax return, the CRA says.

Typically, an employee must be required to work from home in order to claim a deduction for home office expenses.

However, “for 2023, if an employee has voluntarily entered into a formal telework arrangement with their employer, the employee is considered to have been required to work from home,” the agency said in guidance late last week. The agreement can be either written or verbal and does not need to be part of an employment contract.

The temporary “flat rate” method, which allowed Canadians working from home due to Covid to claim up to $400 in employment expenses in 2020 and up to $500 in 2021 and 2022, is not available for 2023. The simplified method didn’t require an employee to track expenses or obtain a Form T2200: Declaration of Conditions of Employment.

The CRA has issued an updated T2200 for 2023, a completed and signed copy of which employees need to obtain from their employer to claim employment expenses under the “detailed” method, the only method available for 2023.

Under the detailed method, an employee who works from a home office more than 50% of the time for a period of at least four consecutive weeks in a year can claim eligible expenses.

An employee may also be eligible if they only use their home work space to earn employment income and they do so “regularly and continually for in-person meetings with clients, customers, or other people” for work purposes, the CRA indicated.

Eligible expenses include utilities, home internet, rent, maintenance and minor repair costs and certain office supplies, but not mortgage payments. Only commission-based employees can deduct property taxes and home insurance.

Employees must calculate eligible expenses based on the ratio of the size of their home work space to the size of the finished space of their home, and in proportion to the employment use of the space as opposed to personal use.

Employees can’t claim expenses for which the employer has already paid.

To claim expenses, employees need to file a Form T777: Statement of Employment Expenses and must keep receipts, documents and related records. They do not need to file the T2200 with their return, but need to have one if the CRA asks.

The CRA has updated the T2200 so that employers have to complete only the first six questions in cases where an employee is just claiming home office expenses. The remaining questions relate to travel, vehicle and other expenses.

The T2200S: Declaration of Conditions of Employment for Working at Home Due to COVID-19 isn’t available for 2023.

Self-employed individuals claim expenses under a separate “business-use-of-home” regime.

The CRA has not provided guidance for claiming employment expenses for 2024 or subsequent years.