“Am I able to deduct home office expenses?”
It’s a question we hear a lot from traditional employees, the ones working for a company on a standard salary with no commissions. The answer can be somewhat confusing for two reasons:
- The Canadian tax system is often far more complicated than it needs to be.
- Some of the tax laws have been really slow to adapt to changes in how the world works today, especially in the throes of a pandemic.
The traditional employee can usually deduct home office expenses under the following circumstances:
- Your home office needs to be your principal place of work.
This means you must be spending more than 50% of your time doing your job from your home office. But, as a word of caution, how that is calculated is unclear. Does that mean 50% of your entire year? What if you spend 50% of a certain month in your home office? Do these scenarios qualify or not? There’s not a lot of guidance on this from the tax authorities.
- Your home office must be used exclusively for employment, with regular and continuous meetings carrying on.
The rule of thumb here is fairly simple. You cannot claim home office expenses if your workspace is used for other things. If you work in your kitchen, then that may prove prohibitive as, obviously, that room has other uses. If you work in your bedroom, that also qualifies as mixed-use since you’re in there sleeping at night. So, if your workspace is used for other things, deductions become a non-starter.
As for qualifying with regular and continuous meetings, the current tax laws still do not recognize our updated technologies or the realities of working through a pandemic. You might think that a conference or Zoom video call would quite easily qualify as a meeting, especially at a time when we’re being encouraged to wear masks and keep our distance. Surprisingly, this is not the case. In defining what qualifies as a meeting, the CRA takes an outdated, literal approach, recognizing only meetings where in-person interaction has occurred.
You can generally claim home office expenses if your employer demands you work at home or pay for supplies as a condition of employment in your contract. But what about the employee who’s been forced to work at home because of instruction from public health? Or the employee who needs to work at home because they have a higher-risk of COVID infection? They may not qualify because it’s highly unlikely there’s a mention of these extenuating circumstances in the employee’s contract.
Employers could potentially provide relief here with an official letter that demands – for COVID and health reasons – that the employee must work from home. But it continues to be our hope the CRA soon begins to update and clarify some of these tax laws to account for both a changing world and these challenging times.
Are you eligible to deduct home office expenses? Which expenses are actually deductible? And is there a greater risk of being audited? Find out more by listening to Episode 7 of the Vaive and Associates Tax Podcast, hosted by Rolland Vaive.