If you've been working from the couch, kitchen table, or kids' bedroom this year due to the novel coronavirus pandemic, you will likely be able to claim home office expenses on your next tax return without showing any receipts. . But don't expect a big tax break.</p>
The Trudeau government’s fall financial update included a simplified home office deduction that would allow employees working from home due to COVID-19 to claim a tax deduction of up to $ 400 “without the need for follow detailed expenses ”.
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The Canada Revenue Agency will not generally ask people to provide a signed form from their employers, ”the government said.
The CRA has yet to release more details on exactly how the simplified deduction works, but tax professionals already have a rough idea.
An Ontario-based employee earning $ 65,000, for example, would save nearly $ 120 in federal and provincial taxes with a deduction of $ 400, assuming no other eligible source of income or expense is met, according to Lisa. Gittens from H&R Block.
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It’s a relatively small amount, says Gittens. For higher incomes, the tax break would be larger – all other things being equal – but not by much, she adds.
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Tax deductions reduce your taxable income, while tax credits decrease the amount of tax you will have to pay on your taxable income.
Ottawa’s decision to make the new home office tax break a deduction means eligible Canadians can save on their federal and provincial taxes, Gittens says.
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But not everyone can claim the maximum deduction. So far, the government has said that what Canadians can claim will depend on how much time they spend working from home this year.
In addition, the new deduction is only for employees and in particular those who had to start working from home in 2020 because of COVID-19. If you worked away from the home office before the pandemic or if you are self-employed, you will need to manage your work-from-home expenses in the usual way, says Gittens.
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For employees, this likely requires filing Form T2200, a tax slip issued by employers to claim expenses incurred while on the job. For the self-employed, there is Form T2125, also known as the Statement of Business and Professional Activities.
In addition, the new deduction of up to $ 400 relates to expenses such as office supplies or the cost of business calls that your employer has not already reimbursed. That doesn’t include things like a new laptop, ergonomic chair, or standing desk, Gittens warns.
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Fortunately, at the very onset of the pandemic, the CRA said it would allow employers to reimburse employees up to $ 500 tax-free for the purchase of “personal computer equipment” that would allow them to work at home. home.
The tax agency also recently said that a $ 500 exemption would extend to home office furniture.
However, the CRA also clarified that $ 500 is the maximum tax-free reimbursement for each employee, not for each piece of office equipment.
Yet just because you bought a more comfortable chair doesn’t mean you will be reimbursed. Employers are simply allowed, but not required, to reimburse up to $ 500 tax-free for home office equipment.
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