Home office expenses/T2200

The release of additional details on the T2200 and home office expenses will simplify the rules for employees and their employers. The release included helpful tools, including a comprehensive calculator, guidance and forms, and a redesigned T777S form. However, it did come up short of CPA Canada’s recommendation that T2200 forms should generally not be required in respect of employees who are claiming home office expenses due to the pandemic.

Here are the highlights:

Employees will generally be able to claim a home office expense deduction if they worked from home in 2020 due to the COVID-19 pandemic and in particular, more than 50 per cent of the time from home for a period of at least four consecutive weeks in 2020.

Where the employee qualifies, they can do a detailed calculation or they can use a temporary flat rate method. If they use the flat rate method, then no T2200 is needed. However, if they do a detailed calculation, they will have to obtain a regular T2200 form or a shortened pandemic version of the form (Form T2200S) from their employer.

Under the flat rate method, the individual can claim $2 per day for each day worked at home up to a maximum of $400 (i.e. 200 days).

The CRA has also announced that internet access costs are eligible, but only if the detailed calculation approach is used. It appears that the CRA expects this cost to be prorated on the same basis as utilities such as electricity and heat.

The T2200S is much shorter than the simplified version that the CRA previously circulated. An employer will only have to confirm whether the individual worked at home due to the pandemic, whether they were reimbursed for home office costs and whether those costs are reported on the employee’s T4.

One of the difficult issues in developing a flat rate method for all employees was that renters can generally claim a higher amount than homeowners under existing rules. For many, it could be more than $2 per day. In addition to renters, we assume that other employees will be better off using the detailed method, such as those who worked at home for more than 200 days.

For employers, the fact that many of their employees will want to do a detailed calculation and will therefore need a form creates a decision. Will T2200 forms be processed as employee requests are made, or will the employer choose to produce and distribute T2200S forms for all employees who are working at home because of the pandemic? This was one reason why we recommended a general waiver of the T2200 requirement for employees working at home due to the pandemic. The good news is that for those employers who choose to produce forms for all eligible employees, the T2200S is much simpler than prior versions of the form. Note that the usual approach will generally apply for those employees who had pre-existing work at home arrangements.