If you are an employee who worked from home in 2023, either fully or partially remotely, there are some updated rules you should be aware of when you claim your home office deductions.
Temporary Flat Rate Method
During COVID, employees could claim work from home tax deductions using a simplified method at a flat rate of $400. It’s important to note that this flat rate method was temporary and available only for the years 2020, 2021, and 2022.
For 2023, this has ended and you will need to use the detailed method this year. You will also need a completed T2200 Form, Declaration of Conditions of Employment, from your employer to confirm you were required to work from home.
Eligibility
The CRA’s T4044 Employment Expenses 2023, includes updated guidance on employees’ eligibility to deduct home office expenses. It clarifies that both full- and part-time employees can deduct eligible home office expenses that are incurred and not reimbursed by the employer, as long as two conditions are met. You must have spent over 50% of your time working from home for a minimum period of four consecutive weeks. Your expenses incurred must have been directly connected to your work.
These criteria align with previous rules for employees working from home because of COVID-19.
Employer declaration
Beginning in 2023, employers are no longer required to provide handwritten signatures on Form T2200, Declaration of Conditions of Employment. Electronic signatures are now accepted by the CRA for these forms.
Employers must still provide a completed and signed Form T2200 for employees in provinces and territories outside Québec to claim home office expenses or other employment expenses for the 2023 tax year. The 2023 version of the T2200 form has been updated to allow employers to omit certain sections if the only employment expenses being claimed are related to home office expenses.
Similar to previous versions, the 2023 T2200 form requires employers to confirm whether they required the employee to use a part of their home for work, as specified in the employment agreement or in a written or verbal agreement between the employer and employee.
According to the CRA, if an employee voluntarily enters into a formal telework arrangement with their employer, they are considered to have been required to work from home. The term “formal telework arrangement” is not explicitly defined. The CRA suggests, however, that an employee is considered required to work from home in situations where the employee works from home only partially from home, such as for only a certain number of days per week; work does not need to be fully remote for claiming home office-related employment expenses.
What You Can Claim
Employees who work from home may be eligible to claim certain expenses related to their home office. For a full breakdown of what can or cannot be claimed, see the CRA website.
If both spouses work from home, they must decide which expenses each will claim, ensuring that each expense is only claimed once.
Expenses You May Be Eligible to Claim
Expenses that can be claimed include various utilities like electricity, heat, water, and a portion of condominium fees that cover these utilities. Additionally, home internet access fees, maintenance and minor repair costs directly related to the workspace, and rent for the home can be claimed.
Commissioned employees may also claim expenses such as home insurance, property taxes, and lease payments for equipment used to earn commission income.
Maintenance and minor repair costs can be claimed if they relate directly to the workspace. Similarly, a portion of rent for a rented home can be claimed if used as a workspace.
For condominium fees, only the portion related to electricity, heat, and water used within the personal unit can be claimed. Home internet access fees are claimable on a monthly basis, excluding connection fees and fees related to leasing equipment.
Expenses You Cannot Claim
There are expenses that cannot be claimed, including mortgage interest, principal mortgage payments, home internet connection fees, furniture, and capital expenses like renovations or improvements to the property.
Capital expenses that improve the property beyond its original condition cannot be claimed. This includes major renovations or improvements like changing furnaces, windows, or flooring.
Limitations
There are limitations on claiming workspace expenses, such as when working only part of the year from home, having multiple income sources, or when expenses exceed income. In these cases, the amount that can be claimed is limited, and any excess expenses may be carried forward to the next year but cannot create or increase a loss from employment.
For help preparing your income tax return, to ensure you get all of the deductions you are owed, trust the tax experts at Pharma Tax, who specialize in helping pharmacists like you.
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