CRA Gives Further Details on Home-Office Expense Claims for 2023 After Scrapping $2-a-Day Method

The Canada Revenue Agency’s headquarters in Ottawa is seen in a file photo. (The Canadian Press/Sean Kilpatrick)

The Canada Revenue Agency (CRA) has provided further guidance on how to claim home-office expenses for the 2023 tax year after scrapping the simplified $2-per-day method introduced during the COVID-19 pandemic. The new rules make a detailed expense-claim method the only option for employees who worked from home in 2023 and wish to claim home-office expenses.

The temporary flat-rate method, in effect for three tax years from 2020 to 2022, enabled remote employees to claim a deduction of $2 per day worked if they worked over 50 percent of their time at home for at least four consecutive weeks. They weren’t required to provide receipts or proof of expenditures and didn’t need their employer to complete and sign a CRA form to certify their work-from-home arrangement.

Following the CRA’s Dec. 21, 2023, news release saying the flat-rate method doesn’t apply to the 2023 tax year, on Feb. 2 the agency updated its website to provide more information and to supplement the guidance in its T4044 guide on how to claim employment expenses for 2023. The 2023 process, similar to what was in place before 2020, reintroduced the requirement for remote employees to track actual home-office expenses and do calculations to claim a deduction on their income tax returns due April 30.

Eligibility

Employees wishing to claim 2023 expenses for working from home must meet specific conditions that include being required by the employer to work from home and to cover expenses related to the home workspace.

The CRA noted that the work-from-home requirement need not be explicitly stated in the employment contract but should be a formal agreement, whether verbal or written agreement. In addition, someone who voluntarily entered into a formal work-from-home arrangement with the employer is considered as having been required to work from home for tax purposes, including in a hybrid work arrangement.

Moreover, to be eligible for claiming home-office expenses, workers need to have spent over 50 percent of their work time in their home space for at least four consecutive weeks in 2023. Those who worked more than one such period during the year have the option of claiming expenses for each separate period.

Workers must also obtain from their employer a completed and signed copy of the CRA form T2200, Declaration of Conditions of Employment, which certifies the conditions of employment and the requirement that the employee pay for employment expenses. The T2200 does not need to be submitted with the return but must be retained in case the CRA asks to review it.

Workspace Size and Use

The CRA website provides detailed instructions on how to determine the size and use of one’s home workspace in order to calculate the claim for workspace-in-the-home expenses.

All finished areas within the home count toward the size of the home, including bathrooms, hallways, and the kitchen. Expense claimants must measure or use a reasonable estimate of the size of their workspace in their home in order to determine the percentage of their home used as their workspace.

To claim the employment-use portion of the actual expenses paid—as opposed to the personal-use portion—employees must also determine the number hours per week the space is used for work.

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Eligible Expenses

The types of home-office expenses that employees can claim, whether they are salaried or commission workers, include utilities—electricity, heat, and water—along with rent, maintenance and minor repair costs, and monthly home internet access fees.

Commissioned employees, defined as those who sell goods or negotiate contracts, can also claim home insurance, property taxes, and leased devices such as cellphones, computers, laptops, tablets, and fax machines that relate to earning their commissions.

However, neither salaried nor commission employees can claim mortgage interest, principal mortgage payments, home internet connection fees, furniture, wall decorations, and capital expenses such as replacing windows, flooring, or the furnace.

In cases where both spouses in a household meet the work-from-home eligibility criteria, they must decide which expenses each will claim. Each expense can be claimed only once.

The total deduction that an employee can claim is calculated based on his or her eligible expenses, the percentage of the home used as the office workspace, and, for common (shared) areas like the kitchen table or family room, the amount of time spent working there.

To claim workspace-in-the-home expenses, individuals must fill out the CRA form T777, Statement of Employment Expenses, and submitted it along with the income tax return.