Home Office Expenses: A Guide for Canadian Employers

The shift to remote work has transformed how many businesses operate. This guide by CredibleCFO LLP will help Canadian employers understand their responsibilities regarding home office expenses, including eligibility, required paperwork, and best practices.

How Can Employees Claim Home Office Expenses in Canada?

Employees who work from home may qualify to deduct certain expenses if they were paid out of pocket. For eligibility, employees need a signed Form T2200 from their employer to make a claim with the Canada Revenue Agency (CRA).

Employer Obligations for Home Office Expenses

As an employer, you have a role in supporting your employees' claims. Here’s what you need to do:

1. Establish a Work-From-Home Agreement

Ensure there is an agreement that specifies your employee is required to work from home. Including this in employment contracts helps clarify expectations.

2. Complete Form T2200/T2200S

For eligible employees, fill out Form T2200 for regular years or Form T2200S for pandemic years (2020-2022). Employees must keep this form for six years, although they don’t file it with their tax returns.

Additional Eligibility Requirements for Employee Home Office Expenses

Beyond the work-from-home agreement and T2200 forms, there are CRA requirements employers should be aware of:

Remote Work Requirement: An agreement stating the employee must work from home.
Unreimbursed Expenses: Only out-of-pocket expenses can be claimed.
Home Workspace: Employees can work in a designated office or shared space, but calculations differ.
Eligible Expenses: Only specific work-related expenses are claimable.

Eligible Home Office Expenses for Employees

Expenses depend on whether employees are salaried or commission-based. Here’s a breakdown:

For Salaried and Commission Employees

Eligible expenses include office supplies and workspace-in-the-home costs (e.g., electricity, internet).

Additional Deductions for Commission-Based Employees

Commission employees may also claim home insurance, property taxes, and other related expenses.

Calculating Home Office Expenses: Detailed vs. Simplified Method

Employees have two options for claiming expenses:

1. Detailed Method

This method applies for 2023 onwards or 2019 and prior. Employees calculate the percentage of home space used for work.

2. Simplified Method

Available for 2020-2022, this method allows a flat rate of $2 per day, up to $500. Employees must keep records and fill out Form T777S.

Common Mistakes and Misunderstandings

To avoid mistakes, help your employees be aware of the following:

Employee vs. Self-Employed Rules: Employees use T777 forms, not the self-employed deduction forms.
Accurate Expense Reporting: Only unreimbursed expenses are claimable.
Personal vs. Business Expenses: Personal expenses are not deductible for home office use.
Record-Keeping: Employees must keep their completed T2200 forms for six years.

Conclusion: Clarity for a Smoother Process

By providing clear guidelines and supporting employees with the required documents, you make tax season smoother for everyone. For specific tax questions, always consult a tax advisor.

**CredibleCFO LLP** is here to support your business with bookkeeping, accounting, and financial guidance. Contact us to see how we can assist with your company’s unique needs.