For three filing seasons a lot of Canadians deducted a home office by counting days and multiplying. Two dollars a day, no receipts, no signature from anyone. It was simple, it was generous relative to the effort, and it is gone.
That flat rate was a temporary measure. It applied to the 2020, 2021 and 2022 tax years and it was not extended. Anyone claiming a home office for a year after that is back on the detailed method, which is the method that existed before and which has always required more.
What the detailed method actually asks for
A signed T2200 from the employer. This is the part people discover in April. The form is the employer's statement that the conditions of employment required you to maintain a workspace, and without it the claim has no basis. An employer is not obliged to issue one. Some large employers issue them automatically, some will issue on request, and some decline as policy.
A workspace that meets one of two tests. Either the space is where you principally perform your duties, meaning more than half the time, or it is used exclusively for work and regularly for meeting people in the course of that work. A laptop on a kitchen table for two days a week fails both.
Actual expenses, apportioned. Rent, utilities, maintenance, and a reasonable share based on the area of the workspace against the area of the home. Salaried employees cannot claim mortgage interest, property tax, insurance or capital cost allowance. Commissioned employees can claim insurance and property tax. That distinction catches people who read advice written for the wrong category.
The part that costs money later
The flat rate required no records. The detailed method requires you to keep them, and the Canada Revenue Agency can ask for six years from the end of the tax year they relate to. A claim made without receipts is not wrong at the moment it is filed, it is wrong at the moment it is reviewed, which is often two years later when the utility bills have been deleted.
If the workspace is genuine and the employer will sign, the detailed method is frequently worth more than the flat rate ever was. The failure mode is not claiming too little. It is claiming a number that was reasonable and having nothing to show for it.
Khaled Hawari is a tax and financial consultant in Ottawa. More on personal and corporate filing at https://khaledhawari.ca/
Comments
Post a Comment