Does Canada Have a Work-From-Home Tax Credit?

Understand why the Government of Canada extended the work-from-home tax credit to tax year 2022. Continue reading here.

As the economy improves and people have more disposable income, more people are finding the option of working from home. Virtual work is definitely a factor, but there are a lot of other things that are leading to this trend. For example, telecommuting is a growing trend and it is becoming more and more popular. Plus, the advancement of technology has also made it easier for people to work from home, including the availability of affordable internet, smartphones, and tablets.

There are a lot of benefits to working from home. It allows people to work more and have more free time. It also enables people to work around their schedule and work during the day when necessary. However, the one thing that a lot of people forget is that working from home can be very boring.

But, there are so many ways to make your flexible workplace experience more interesting. One way is to take a break and go outside. You can go on a walk, go to the gym, or go outside and play with your kids. Working from home can be very exciting. It will not just be a mundane experience. And the most important of all – the Work-From-Home Tax Credit if you are from Canada.

What is a Work-From-Home Tax Credit?

A Work-From-Home Tax Credit is when you can deduct the cost of your work-related expenses, such as internet, phone and company equipment. If you take this tax credit, you might be able to reduce your taxable income and your taxes. 

Furthermore, these types of tax credits can be granted to certain individuals, such as, parents who are caring for their children so that they can work from home without having to be physically present. These tax credits apply to a wide variety of domestic services, such as, cleaning, babysitting, computer-related services, and more. 

The tax credit will allow the individual to subtract a certain amount of their income to be able to reduce their overall tax. This will be beneficial for individuals who are employed from home, or for any other person who does not have a physical workplace.

Work-From-Home Tax Credit from Canada

The flexible workplace tax credit is a nonrefundable tax credit. You don’t get a refund when you file your taxes, but you can use the credit to reduce your tax liability. This credit is made by the Canadian government as a response to those who are truly affected by COVID-19. The tax credit was established last 2020 but it has been a buzz to many until 2022. 

Canada’s work-from-home tax credit doesn’t require its citizens to have supporting documents or any Form T2200 or T2200s signed by the employer. The claim is also $2 a day and has a capped of $500 which amounts to 250 working days of the employee. 

Eligibility of Work-From-Home Tax Credit in Canada

The tax credit for work-from home can help to offset the cost of working from home. The question is whether or not it is a worthwhile option for you. The Canadian government passed legislation that means that for the 2020 tax year, individuals and companies can earn up to $500 in work-from-home tax credits. In this part of the blog, we explore who is eligible for the work-from-home tax credit in Canada, and how the work-from-home tax credit may affect your tax bill.

• An employee who is telecommuting in 2022 because of the pandemic
• An employee who does telework 50% of the time or in at least 4 consecutive weeks during the year of 2022
• An employee who spends money in only home office expenses and doesn’t claim any office-related expenses
• An employee with an employer who doesn’t reimbursed any home office expenses
• An employee who was required to have a flexible workplace by their employer
• An employee required to pay home office expenses by the employer
• An employee with home office expenses fully related to work
• An employee with finished copy of Form T2200S or T2200 signed by your employer (unnecessary but helpful). 

What counts as a working day?

To determine whether or not someone is paid, a working day is usually defined as a day when someone is physically present. For this reason, some people argue that remote workers should be considered part-time employees. However, some countries and states have defined the working day differently especially in Canada. 

In the country, whether a work from home employee works part-time or full-time, it counts as a working day and is countable for the total working hours required in work from home tax credit. Furthermore, the following doesn’t count as working days:

• Days off whether scheduled or unscheduled
• Vacation days
• Sick days
• Other leaves of absence

What counts as a work space?

The distributed work tax Credit has two methods; the temporary flat rate method and the detailed method. For the former, you don’t need to determine the size of the work space you have in order to get a tax deduction of $2 for every working day. But for the latter, you have to calculate the size of your home including the hallway, bathroom, bedroom, kitchen, and other spaces. After that, measure your working space. 

Meaning, if you have a house with 1,000 square meters and 10% of that space is your working space, you will be able to deduct that percentage relative to the certain expenses of you working from home. 

How to claim Work-From-Home Tax Credit in Canada?

The Canada Revenue Agency allows for Canadian citizens and Permanent Residents who work outside their main home to claim a tax credit. If you are not eligible for this tax credit or you do not know about it, but you would like to claim it in the future, this blog will help you with your claim. Here’s how:

For the temporary flat-rate method, a form T777S is a requirement which is a Statement of Employment Expenses for Working at Home Due to COVID-19. For the detailed method, you’ll be needing form T777. You will also be needing a T2200S or Form T2200 from your employer. For both of the methods, you need work-related expenses done in your home just in case you get audited. 

Once you have the forms, provide it to your tax preparation professional so it will be included on the file of your tax returns. 

Importance of Work-From-Home Tax Credit in Canada

The work-from-home tax credit in Canada is the most significant tax credit for those who work remotely. It is a tax credit that can be claimed by all employers, whether they are in the public or private sector. The telecommuting tax credit is an annual tax credit that can be applied to your tax return. It is designed to encourage individuals to work remotely and live in a location other than the one they work in. 

Should you take advantage of a Work-From-Home Tax Credit?

Yes. The work-from-home tax credit is in place to help people who does virtual work and who would not otherwise qualify for the benefits that come with being a full-time employee. You can take advantage of this credit by claiming a loss for the hours that you work from home.

Final thoughts

We know that many people want to work from home to be able to spend more time with their children, to take care of an elderly relative or to be able to enjoy more time with friends and family. We hope this blog post was able to help you figure out whether a work-from-home tax credit is right for you and if so, how to go about claiming it. We hope you enjoyed our blog about work-from-home tax credits in Canada!