New Home Office Expense Rule

Well, newish. It’s more of a throwback rule actually.

Prior to the mass office exodus caused by the Covid-19 pandemic, the CRA required specific tracking of expenses related to the costs associated with an active home office. When, in 2020, working from home became the norm for so many, they adjusted their requirements for claiming home office expense deductions for employed individuals who worked out of their homes.

For the 2020-2022 tax years, a temporary flat rate method was incorporated, allowing employees who worked from home for 50% or more of their annual working hours to claim $2/day as a deduction on their income tax.

A recent announcement revealed that the flat rate method will not be an option for employees in the 2023 tax year and, we can assume, the following years.

What does this mean for employees?

In a nutshell…diligent documentation. Employees who were required to work from home for 50% or more of their working hours in 2023 will need to specify their eligible associated expenses and calculate the portion of them that is relevant directly to their in-home work space. Come tax time, form T777 will need to be completed in order to receive the relevant deduction.

What does it mean for employers?

If you are on your company’s payroll as an employee, it means you need to do the same tracking and calculating as your other employees do, for one. In addition to that, it is important to provide your employees who work from home with a T2200 to help support their claim. This form indicates that working from home is a condition of their employment and also specifies whether they are eligible to claim for other expenses like office supplies, tools, etc.

Reviewing the detailed method with your employees, and supporting them with the resources they need to make an effective claim is a simple way to display your appreciation for their contributions to your success.