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Whether you’re an employee or self-employed, this guide breaks down the different work-from-home expenses you can claim and all the new changes to the tax filing process, including the temporary flat rate method recently announced by the federal government.
Reminder: The deadline for filing your tax return is April 30. Self-employed individuals have until June 15 , however, all taxes owed must be paid to the CRA by April 30. Start your tax return today with free tax software. Keep in mind these dates will change if the date specified falls on a weekend, then it will be the next business day.
Here’s everything you need to know about claiming home office expenses on your tax return.
Employee home office deductions
If you’re an employee, there are two ways to calculate your home office expenses for the tax year:
New temporary flat rate method
To simplify the claim process, the federal government has introduced a temporary flat rate method that lets you claim $2 for each day you worked from home, up to a maximum of $500 (250 working days).
When using this method, you don’t need to calculate the exact amount of your home office expenses, determine the size of your workspace, or keep supporting documents like receipts. Your employer also doesn’t need to complete Form T2200 or Form T2200S.
Home office expenses you can claim with this method include:
- Rent
- Electricity, heat and water
- Internet access fees
- Basic cell phone plan and long-distance calls for employment purposes
- Office supplies like pens and paper
- Supplies for maintenance and minor repairs (i.e. cleaning supplies, light bulbs, paint)
You can’t claim other employment expenses such as:
- Computers, laptops, tablets, cell phones
- Computer accessories like monitors, mice, keyboards, headsets, speakers, etc.
- Office equipment like printers, calculators, briefcases, and laptop bags
- Home office furniture including desks and chairs
- Home phoneline
- Mortgage interest and principal mortgage payments
- Internet connection fees (the portion related to the lease of a modem or router)
- Capital cost allowance
- Capital expenses like replacing windows or flooring
- Motor vehicle expenses
To use this method, you must meet all the eligibility criteria:
- You worked from home for reasons related to COVID-19, or your employer required you to work from home
- You worked from home for over 50% of the time for at least four consecutive weeks
- Expenses claimed are home office expenses and not other employment expenses
- You weren’t reimbursed by your employer for your home office expenses
Once you have confirmed your eligibility, you’ll need to fill out Form T777S by inputting how many days you worked from home in and multiplying that number by $2. You then put that total on Line 22900 (other employment expenses) on your tax return. That said, though, this method was only available until 2022. As of the 2023 tax year, you have to use the traditional detailed method.
Don’t forget to file Form T777S with your tax return.
Traditional detailed method
The detailed method allows you to claim the actual amounts you paid for home office expenses. It’s best to use the detailed method if you usually worked from home as an employee before the pandemic.
This method is more complicated than the temporary flat rate method and will require calculations and employer documentation, but there’s a good chance your deductions will add up to more than the $400 temporary flat rate method.
You also need to keep all your receipts, invoices, and bank statements for six years in case the CRA wants to verify your claims.
To qualify for this method, you must meet all of the following:
- You worked from home for reasons related to COVID-19, or your employer required you to work from home
- You had to pay for home office expenses that weren’t or will be reimbursed by your employer
- Your expenses were used for work purposes
- Your workspace is where you worked more than 50% of the time for at least four consecutive weeks, or you only used your workspace to earn employment income
- You have a completed and signed copy of Form T2200 or Form T2200S from your employer
If you meet all the eligibility requirements, you’ll need to determine the size of your workspace, the number of hours you use the space for work, and the number of workers in the home. From there, you’ll split your expenses between work use and personal use.
Use the CRA calculator to figure out the employment use portion of your workspace and make sure to review what expenses can and cannot be claimed.
Before filing your taxes, fill out Form T777S (home office expenses) or Form T777 (home office expenses and other employment expenses), and get a completed and signed Form T2200S or Form T2200 from your employer.
On your tax return, put the amount on Line 9368 from Form T777S or Form T777 to Line 22900 (other employment expenses). Remember to file Form T777S or Form T777 with your return. You don’t need to include Form T2200S or Form T2200 so just keep that for your records.
Self-employed home office deductions
Nothing has changed for self-employed individuals so claim home office expenses just like you have in the past.
The CRA allows you to deduct home office expenses if you meet at least one condition:
- Your home is your main place of business
- The space is used to earn business income only and you use it all the time to meet your clients and customers
Home office expenses include things like:
- Rent
- Property taxes and insurance
- Mortgage interest
- Operating costs like heating and electricity
- Maintenance costs like minor repairs and cleaning supplies
- Capital cost allowances (i.e. computers, printers, furniture, filing cabinets and other office equipment)
Keep in mind you must determine the portion of your home that was used for your business and claim expenses accordingly. You can calculate this by dividing the area of your workspace by the total area of your home.
For example, your home office is 100 square feet and you live in a 1,000-square-foot apartment. In this case, your allowable portion of home office expenses is 10%. That means if your home office expenses total $15,000, you can only claim 10% of that ($1,500) on Form T2125.
You’ll need to do further calculations if you run a part-time business and use your home office for business and personal activities. The easiest way to do this is to take the number of hours you use the workspace for business purposes in a week, divide it by 168 hours, and then multiply the total by the business portion of your home expenses.
Let’s say you use your home office for 16 hours per week for your side gig.
The calculation would be:
16/168 hours x $1,500 = $142.85 (your total home office deduction)
Common tax filing mistakes
Excessive home office expenses often trigger an audit, so be honest about the size of your home office and the expenses that go with it.
Other common mistakes to avoid include:
- Claiming repairs that aren’t related to your home office.
- Claiming full mortgage payments; the principal portion is not deductible.
- Rounding up home office expenses; always add up your receipts and input the exact amounts.
- Putting expenses in one category. Break down expenses and put them in the correct categories.
Don’t forget about business operating expenses
As a self-employed individual, you’re also able to claim various business operating expenses like:
- Phone and internet (only the portion used for your business)
- Small office supplies like pens, paper, stamps, etc.
- Interest and bank charges
- Advertising expenses
- Accounting and legal fees
- Meals and entertainment
- Start-up costs
- Vehicle expenses
Check out the CRA website for a full list of eligible expenses.
