As many of you are aware, in 2020 CRA (Canada Revenue Agency) introduced a new simple way for individuals to claim working from home expenses due to the large numbers of tax payers who were required to work from home due to COVID-19. It is important to note that there have been positive changes made to this simplified working from home expense claim that are being implemented on your 2021 Canadian tax return.
What has changed on your 2021 tax return?
Last year (2020 tax returns) the simplified flat rate deduction was calculated as $2 per day worked from home, up to a maximum deduction claim of $400. This year CRA have announced that this is increasing to a $500 maximum deduction claim! Woohoo.
Who is eligible?
To be eligible to take advantage of the home office expense claim on your 2021 tax return you must meet all of the following criteria:
- You must have worked from home (in Canada) in 2021 due to the COVID-19 pandemic
- You must have worked from home for more than 50% of the time from home for a period of at least 4 consecutive weeks during 2021
- You must only be claiming home office expenses, and are not claiming any other employment expenses on line 22900 of your 2021 tax return
- Your employer must not have reimbursed you for all of your home office expenses incurred during 2021
How do you claim the home office deduction on your tax return?
To make this claim on your 2021 tax return you will need to declare the number of days that you worked from home in your home office
What does this deduction do for your tax return calculations?
We had a lot of clients who were caught out on the definition of a ‘deduction’ on their 2020 tax return. Unfortunately, the $500 deduction will not improve your 2021 tax refund by $500, this deduction simply means that you will no longer be required to pay tax on $500 of your 2021 income. For individuals in a higher tax bracket the deduction will offer higher tax savings than those in a lower tax bracket.
Do you have any questions about your 2021 tax return?
If you have any tax related questions at all, please feel free to reach out to the team at firstname.lastname@example.org or stop by our Vancouver office*. We will be more than happy to assist you become more knowledgeable about your deduction eligibility and to claim the home office deduction on your 2021 tax return if you wish to use our services. We will also be able to advise on any other deductions or tax credits that may be applicable to your tax situation. Tax doesn’t have to be taxing!
*At the time of publishing our Vancouver office is not accepting in person meetings due to COVID-19. Please reach our team via email – email@example.com