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Wednesday, February 14, 2024

New CRA guidelines round make money working from home make it tougher to say bills

Jamie Golombek: The ‘simplified technique’ of claiming home-office bills is now not obtainable for the 2023 tax 12 months

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Should you’re one of many hundreds of thousands of Canadians who labored from house throughout 2023, both full time or on a hybrid-work association, you’ll must take some further time this tax submitting season if you wish to declare a deduction on your home-office bills. That’s as a result of the “simplified technique” of claiming home-office bills is now not obtainable for the 2023 tax 12 months.

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You might recall that on account of the widespread work-from-home preparations that started as a result of COVID-19 pandemic, the Canada Income Company (CRA) launched a simplified technique for workers to say home-office bills.

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Underneath this technique, which was obtainable for the 2020, 2021 and 2022 tax years, you didn’t have to trace your precise home-office bills. As a substitute, staff may declare $2 per day for as much as 250 days, or $500 ($400 for 2020), as employment bills. No receipts or proof of your expenditures was wanted, and, most importantly, no CRA kind was wanted out of your employer to certify your work-from-home association.

However for the 2023 tax return, which is mostly due on April 30, 2024, staff who want to declare home-office bills must undergo the tedious train of tallying all their bills, prorating them after which claiming the suitable quantity as a deduction on their 2023 returns.

Right here’s a fast information to the home-office expense guidelines for workers, which bills qualify and the way the calculation is meant to be accomplished based mostly on the most recent steerage launched by the CRA earlier this month.

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To be entitled to deduct home-office bills, you should be required to make use of part of your house for work. The CRA has confirmed that the requirement to keep up a house workplace needn’t be a part of your formal contract of employment; quite, it will likely be enough if there’s a verbal or written settlement.

The CRA just lately clarified that in the event you voluntarily entered a work-from-home association along with your employer, the company will contemplate you to have been required to make money working from home for tax functions, even in a hybrid-work association.

For the 2023 tax 12 months, the CRA has said you’ll be certified to write down off your home-office bills if your house workspace is the place you “principally” — which means greater than 50 per cent of the time — carried out your duties of employment for a interval of not less than 4 consecutive weeks throughout 2023.

For instance, in the event you’re in a hybrid-work association that has you go into the workplace on Tuesdays and Wednesdays (or 40 per cent of the time), this situation can be happy since you might be working from house the opposite three out of 5 weekdays (60 per cent).

Your workspace generally is a designated room that’s used just for work, or it may be in a typical space that has different functions, resembling a kitchen desk the place you sit throughout working hours.

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To have the ability to make a declare for 2023, you’ll must get a signed copy of CRA kind T2200- Declaration of Situations of Employment out of your employer. The T2200 will not be submitted along with your return, however you’re required to maintain it in case the CRA asks to see it later.

You’ll be able to declare quite a lot of home-office bills, resembling the price of utilities, lease, upkeep and minor restore prices, and residential web entry charges. You usually can’t deduct mortgage curiosity, property taxes, house insurance coverage, capital bills (resembling altering a furnace or home windows) or depreciation (capital value allowance).

Which means the price of a brand new, ergonomic workplace chair isn’t tax deductible, neither is the price of a big, widescreen monitor, each of that are thought-about capital bills. The price of most traditional workplace provides, resembling printer paper, ink, pens and sticky notes, are additionally deductible.

Fee-based staff who promote items or negotiate contracts can declare some bills that salaried staff can’t, particularly: house insurance coverage, property taxes and the prices to lease a cellphone, laptop, laptop computer, pill, and many others., that relate to incomes fee earnings.

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For utilities, lease and different house bills, it’s essential allocate the bills on a “affordable foundation” to find out the portion associated to employment use. That is sometimes accomplished by dividing the realm of the workspace by the full completed space (together with hallways, bogs, kitchens, and many others.) of the house. You’ll be able to’t embody bills associated to part of a house that was not used as a workspace, resembling the price of repainting a bed room the place you didn’t work.

The house-office expense deduction is calculated based mostly on eligible home-office bills, the proportion of the house’s space that’s used for a house workplace and, for a shared area such because the kitchen desk, the period of time labored from that area. To make your declare, you’ll want to finish CRA kind T777 Assertion of Employment Bills, and file it along with your earnings tax return.

Should you labored from house for under a part of the 12 months, you may solely declare bills paid for the a part of the 12 months that you simply labored there not less than 50 per cent of the time for not less than 4 consecutive weeks.

Edward Rajaratnam, Canadian observe lead accomplice with Ernst & Younger’s (EY) world employment tax companies group, has been fielding quite a few questions from employers on the brand new guidelines for 2023, and the logistics of finishing T2200s for a number of staff.

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Beneficial from Editorial

“I’m disillusioned that the principles didn’t come out earlier,” he mentioned, noting that employers are actually scrambling to place in place processes to get T2200s within the fingers of qualifying staff in time for private tax submitting season.

EY has held two webinars over the previous month to supply related and well timed info on the brand new T2200 guidelines to the enterprise group. It has additionally developed service options to assist ease the executive burden of employers in search of help in finishing the T2200s for lots of of staff — or 1000’s in some circumstances — that will not have the sources to do the work internally.

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Non-public Wealth in Toronto. Jamie.Golombek@cibc.com.

Should you favored this story, join extra within the FP Investor publication.

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