In recent years, the concept of remote work has become increasingly popular. Whether it’s for flexibility or to avoid long commutes, more and more people are opting to work from home, allowing them to be more productive and efficient with their time. With the recent pandemic, millions of people have been forced to work from home, leading to a significant increase in remote workers.
This change has led to a surge in demand for home office equipment, which includes everything from computer hardware to office furniture. If you’re one of the many people who now work from home or are considering it, it’s essential to know how to claim home office expenses to help you save money come tax time.
Home Office Expenses: What You Can Claim
If you’re self-employed or an employee who works from home, you can claim a portion of your home office expenses related to using your home as a place of business. The Canada Revenue Agency (CRA) allows a deduction in certain eligible expenses for your home office space. Here are some examples of eligible expenses:
Home Office Space
The CRA requires that you have a designated workspace in your home exclusively for work-related activities to claim home office expenses. Your workspace must also be available for customers or clients to visit if you’re running a business. If you’re an employee who works from home, your employer must require you to work from home.
Home Office Equipment
If you purchase any equipment, such as a computer, printer, or scanner, you can claim a portion of the expense. However, if you use the equipment for both personal and business use, you can only claim the portion that is used for business purposes.
Office Furniture
You can claim a portion of the expenses related to office furniture, such as a desk, office chair, bookshelves, lamps, and other items used explicitly for work-related purposes.
Utilities
If you own a home, you can claim a portion of the expenses related to utilities such as electricity, gas, water, and internet fees. However, if you’re a renter, you can only claim a portion of your internet and phone expenses.
Maintenance and Repairs
If you own your home, you may be eligible to claim a portion of the expenses related to repairs and maintenance of your home office space.
How to Claim Home Office Expenses
Before claiming home office expenses, understand that the rules differ based on whether you’re an employee or self-employed. Here’s how you can claim home office expenses depending on your work status:
Self-Employed
If you’re self-employed, you must complete Form T2125, which reports business income and expenses in your tax return. When completing Form T2125, you’ll need to provide the following information:
- The square footage of your home office space
- The total square footage of your home
- The expenses related to your home office space
To calculate your home office expenses, follow these steps:
- Calculate the total cost of your home expenses, including rent, mortgage interest, property taxes, utilities, maintenance, and repairs.
- Determine the percentage of space used for work from the total space in your home.
- Multiply the percentage of space used for work by the total cost of your home expenses.
This calculation will give you the total amount of your home office expenses.
Employee
If you’re an employee who is required to work from home, you can claim home office expenses in two ways. You can either use the detailed method or the simplified method.
Detailed Method:
The detailed method requires more paperwork, but it may result in higher deductions. You’ll need to keep receipts and records of your expenses throughout the year. You’ll need to provide the following information when filing your tax return:
- The total amount of your home expenses
- The square footage of your home office space
- The total square footage of your home
To calculate your home office expenses, follow the same steps outlined for self-employed individuals.
Simplified Method:
The simplified method allows you to claim $2 for every day you worked from home, up to a maximum of $400. You don’t need to provide any receipts or records. All you need to do is provide the number of days you worked from home when filing your tax return.
Conclusion
If you’ve been working from home, you may be eligible to claim home office expenses on your tax return. To ensure you claim the right expenses, keep accurate records of your home office expenses and accurately calculate the percentage of your home expenses that are related to your home office space. Remember, the rules are different for employees and self-employed individuals, so be sure to follow the appropriate guidelines.
Claiming home office expenses can help reduce your taxable income and maximize your tax refund, making it a worthwhile exercise. As always, consult with a tax professional for advice on the proper way to claim your home office expenses.