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Are you an emigrant?

Generally, you are an emigrant for income tax purposes if you meet all the following conditions:

  • you leave Canada to live in another country
  • you sever your residential ties with Canada

Severing your residential ties with Canada means that you do not keep your main ties with Canada. This could be your case if:

  • you dispose of or give up your home in Canada and establish a permanent home in another country
  • your spouse or common-law partner or dependants leave Canada
  • you dispose of personal property and break social ties in Canada, and acquire or establish them in another country

If you leave Canada and keep residential ties in Canada, you are usually considered a factual resident, and not an emigrant. However, if you are also considered to be a resident of another country with which Canada has a tax treaty, you may be considered a deemed non-resident. Deemed non-residents are subject to the same rules as emigrants.

For more information on residential ties and residency status, go to Determining your residency status.

When do you become a non-resident?

When you leave Canada to settle in another country, you usually become a non-resident for income tax purposes on the latest of:

  • the date you leave Canada
  • the date your spouse or common-law partner and/or dependants leave Canada
  • the date you become a resident of the country you settle in

If you lived in another country before living in Canada and you leave Canada to resettle in that country, you usually become a non-resident on the date you leave Canada. This applies even if your spouse or common-law partner temporarily stays in Canada to dispose of your home.

For more information about your tax obligations, go to Non-residents of Canada.

What you need to do when you become an emigrant

If you still have bank accounts in Canada or amounts being paid to you from Canada, you are required to notify any Canadian payers and your financial institutions that you are no longer a resident of Canada.

Do you have to file a tax return?

Complete and send a Canadian tax return to the Canada Revenue Agency (CRA) if:

  • you owe tax
  • you want to receive a refund because you paid too much tax in the tax year

For more information, go to Do you have to file a return?.

Notes

If you determine that you do not have to file a return, you should let the CRA know the date you left Canada as soon as possible.

If you owned properties or goods when you left Canada you may have to report a capital gain.

Which income tax package should you use?

For the tax year that you leave Canada, use the income tax package for the province or territory where you resided on the date you left Canada.

If you were a resident of Quebec before you left Canada and you want information on filing a Quebec tax return, visit Revenu Québec.

When and where to send your tax return

To find out when you have to file your return, go to Filing due dates.

To find out where to mail your return, go to Where to mail your documents.

Departure tax

When you leave Canada, you are considered to have sold certain types of property (even if you have not sold them) at their fair market value (FMV) and to have immediately reacquired them for the same amount. This is called a deemed disposition and you may have to report a capital gain (also known as departure tax).

Your property could include the following: shares, jewelry, paintings, or a collection.

For more information, go to Dispositions of property.

Note

If the FMV of all the property you owned when you left Canada was more than $25,000, complete Form T1161, List of Properties by an Emigrant of Canada.

How to complete your tax return

Date of departure from Canada

Enter your date of departure from Canada on page 1 of your return in the area “Information about your residence”.

Information about your spouse or common-law partner

Enter your spouse or common-law partner’s net world income for 2019. Net world income is the net income from all sources both inside and outside of Canada. Underneath, enter your spouse or common-law partner’s net world income for the period you were a resident of Canada. If applicable also enter the universal child care benefit (UCCB) lump-sum payment included on line 11700, and the amount of UCCB repayment included on line 21300 of their return.

What income do you have to report?

Part of the tax year that you WERE a resident of Canada

Report your world income (income from all sources, both inside and outside Canada) on your Canadian tax return.

Part of the tax year that you WERE NOT a resident of Canada

After you leave Canada, as a non-resident, you pay Canadian income tax only on your Canadian source income. However, only certain types of Canadian source income should be reported on your return while others are subject to non-resident withholding tax at source.

For more information on your tax obligations as a non-resident, go to Non-residents of Canada.

What deductions can you claim?

You can claim most deductions that apply to you. For more information, go to Deductions, credits, and expenses.

Moving expenses

Generally, you cannot deduct moving expenses for a move out of Canada.

However, you may be able to deduct your moving expenses if both items listed below apply:

  • you left Canada to take courses at the post‑secondary level as a full‑time student at an educational institution in another country
  • you received a taxable Canadian scholarship, bursary, fellowship, or research grant to attend that educational institution

For more information, go to Line 21900 – Moving expenses.

What credits can you claim?

Federal non‑refundable tax credits (step 5 of your return)

The federal non-refundable tax credits you can claim are limited to the total of the following amounts:

Provincial or territorial non‑refundable tax credits (Form 428)

The amount of certain provincial or territorial non‑refundable tax credits you can claim may also be limited.

Generally, the rules to calculate your provincial or territorial non‑refundable tax credits are the same as those used for the corresponding federal non‑refundable tax credits. However, the amounts used to calculate most provincial or territorial non‑refundable tax credits are different from the corresponding federal credits.

Overpayment of Canada Pension Plan (CPP) or Quebec Pension Plan (QPP)

If you were not living in Quebec before you left Canada, go to Line 44800 – CPP overpayment.

If you were living in Quebec, any overpayment of CPP or QPP contribution will be refunded or used to reduce your balance on your federal tax return. Claim on line 30800 of the return, in dollars and cents, the total of the CPP or QPP contributions shown in boxes 16 and 17 of your T4 slips, and the Canada Revenue Agency will calculate the overpayment for you.

You can also calculate your overpayment by using Form RC381, Inter-Provincial Calculation for CPP and QPP Contributions and Overpayments for 2019. As a Quebec emigrant, you claim the amount of your overpayment, if any, on your return by writing code 5552 above line 43700, and entering the amount of the overpayment to the right of this code. Add this amount to your total credits at line 48200.

Federal refundable tax credit (Page 7 of your return)

If you were an eligible educator, you can claim the eligible educator school supply tax credit as long as it applies to the part of the year that you were a resident of Canada.

In addition, you can claim this credits in full for eligible supplies expenses paid in 2019 that relate to the part of the year that you were not a resident of Canada if the Canadian source income you are reporting for the part of the year that you were not a resident of Canada represents 90% or more of your net world income for that part of the year.

However, the total amount you can claim cannot be more than the amount you could have claimed if you were a resident of Canada for the whole year.

Provincial or territorial tax credits (Form 479)

Generally, you are not entitled to these credits unless you were a resident of Canada on December 31.

Which forms to use to calculate your tax and credits

To calculate your tax and credits, complete the return and Form 428 for the province or territory where you resided on the date you left Canada.

If you were a resident of Quebec before you left Canada, visit Revenu Québec.

After you leave Canada

Electing under section 217 of the Income Tax Act

If you receive certain types of income from Canada after you leave, the Canadian payer has to withhold non‑resident tax on the income and send it to the Canada Revenue Agency. This tax withheld is usually your final tax obligation to Canada on the income. However, you could benefit from choosing to elect under section 217 to include this income on your return.

For more information, go to Electing under section 217.

Tax-Free Savings Account (TFSA), Home Buyers’ Plan (HBP), and Lifelong Learning Plan (LLP)

If you hold a TFSA when you leave Canada, you can keep it and continue to benefit from the exemption from Canadian tax on investment income and withdrawals. However, you cannot contribute to your TFSA while you are a non-resident of Canada, and your contribution room will not increase. For more information, go to Tax-Free Savings Account (TFSA).

If you participate in the HBP or the LLP and leave Canada, go to Home Buyers’ Plan (HBP) or to Lifelong Learning Plan (LLP), for the special rules that apply.

Receiving benefits and credits

It’s important that you tell the Canada Revenue Agency (CRA) the date you leave Canada. Generally, as a non-resident, you are not eligible to receive:

If you receive such credits or payments after you leave Canada, contact the CRA immediately.

Forms and publications

Related topics

Calculating Payroll Tax in Canada: A guide for small businesses

It’s easy for Canadian small business owners to get caught up in payroll complexity. According to a recent government report, approximately 90,000
small businesses shut down every year in Canada — as a result, effectively managing payroll is critical to ensure long-term business success. We’ve put
together a guide the tells you all you need to know in order to effectively calculate payroll tax in Canada.

So let’s dive in: What are your specific obligations as an employer? What steps are required for calculating payroll tax Canada? Do you need a bookkeeper or
accountant to ensure payroll accuracy? Let’s start with a quick definition.

What is payroll?
Your payroll lists all employees, their wages and the deductions taken from those wages. Most small businesses now use in-house software or cloud-based
applications to streamline the process of paying staff and ensure deductions are correctly calculated.

Deductions cover everything your business is required to remit. This includes employment insurance (EI), Canada Pension Plan (CPP) contributions along
with federal and provincial income tax. For EI and CPP, deductions follow specific contribution frameworks, while taxes follow schedules set out by the
federal government and each individual province. Deduction amounts vary year-to-year and depending on your employees’ primary place of residence.

Your obligations to employees
As an employer, you have three payroll obligations to employees:
1) Paying Wages
Employees must be paid on a recurring schedule — typically, businesses opt for either monthly or bi-weekly payments.
Wondering how to pay employee salaries? Some SMBs still use physical checks, but this requires manual tracking and entry into payroll systems.

Many now opt for direct deposit, which sends wages directly to staff bank accounts. Setting up direct deposit requires you to create a business account
with the bank of your choice and then collect employee banking data to ensure funds are sent to the correct accounts. You can choose transfer these funds
manually each pay period from your online banking portal, use a payroll system that integrates this function or pay a third-party provider to complete
this task.

2) Remitting Deductions
The Canadian Revenue Agency (CRA) requires you to collect specific deductions from employee pay:
-Employment Insurance (EI)
-Canada Pension Plan (CPP)
-Federal and Provincial Income Tax

3) Ensuring Compliance
In addition to paying staff on a recurring schedule, the CRA typically requires small businesses to remit all “source deductions” — money taken from
employee wages — by the 15th of the month after staff are paid. You must also send T4 and T4A tax slips to employees by the last day of February of the
calendar year following the deduction period. For example, T4 slips for the 2019 calendar year must be sent out by February 29th, 2020.

When to get a payroll account
Do you need a payroll account with the CRA?
First, determine if you’re an employer. According to the CRA you’re considered an employer if you “pay salaries, wages (including advances),
bonuses, vacation pay, or tips to your employees”. You may also fall under the employer category if you provide specific taxable benefits to staff, such as
automobiles or spending allowances. Even if you have no employees or employ seasonal staff, you must still report a “nil remittance” once per
quarter.
Employers must register for a payroll program account with the CRA. To do so, you’ll need all employees’ Social Insurance Numbers (SIN) and have them
fill out form TD1 — which should be done within seven days of hiring.

Once you register for an account you’ll be provided with 15-digit payroll account number. The first nine digits are your unique “business number”. The
following two letters are the program code — RP for the payroll program — and the last four identify each payroll account your business has (0001, 0002,
etc.). Your payroll account number won’t change, and can be used to remit all deductions from employees.

Handling payroll deductions
The Canada Revenue Agency offers an online payroll deductions calculator to help small businesses confirm the amount of CPP, EI and income tax
deductions they are required to remit? The site makes it clear that any risks associated with using the calculator — such as supplying inaccurate
information — rest with small businesses.
The CRA also details when remittance amounts are due. According to its remittance threshold chart, if your average monthly withholding amount
(AMWA) is:
– Less than $25,000 —remittance is due on or before the 15th day of the month after you pay employees
– Less than $3000 — remittance is due on or before the 15th day following the end of each quarter
– Between $25,000 and $99,999.99 — for wages paid in the first 15 days of the month, remittance is due by the 25th day of the same month. For
wages paid after the 15th, remittance is due by the 10th day of the following month.

Calculating payroll tax Canada
How do you calculate payroll tax in Canada? Let’s start with EI and CPP

EI
Each year the government posts a list of maximum insurable earnings ($53,100 in 2019) and rates (1.62%). To calculate contributions, multiply
employee pay for the period by the EI rate — for example, $1000 x 0.0162 equals $16.20 deducted from employee wages. Employers are also responsible
to pay 1.4 times the contribution amount, meaning you’d need to supply $22.68 for a total of $38.88 per period. The list also includes employer and
employee maximum contribution amounts per year — if reached, you no longer need to collect and remit EI for that calendar year.

CPP
The CRA posts a similar list for CPP: In 2019, maximum insurable earnings are $57,400 less a $3500 basic exemption amount to give $53,900 in
maximum contributory earnings. Both employers and employees must contribute 5.10% up to a maximum of $2,748.90. Using our example above,
this means you need to multiply $1000 by 0.051, which equals $51 contributed from both employer and employee totaling $102 per pay period.

How to calculate payroll tax province by province
In addition to EI and CPP you must also deduct federal and provincial income tax from employee wages. According to 2019 federal tax rates, you must
deduct 15% on the first $47,630 of taxable income — in our example above this means $150 on $1000 in wages. No employer contribution is required.
In the same way employers have to worry about calculating sales tax differently in every Canadian province, a similar responsibility exists for
calculating payroll.

Each province also has its own tax rates, published as part of payroll deduction tables by the CRA. In Alberta, businesses must remit 10% in
provincial tax on annual taxable income from $0 to $131,220.00 — or $100 of $1000 in wages. If your business operates out of one province but you have
employees working in another, the CRA advises using the provincial tax bracket where employees typically live and work.

Getting help
Bookkeepers and certified professional accountants (CPAs) can help small businesses streamline payroll operations and reduce the risk of costly errors.
Best bet? Look for someone with small business payroll experience with the skills to create and manage payroll accounts, ensure accurate remittance and
stay up-to-date on any changes. It’s also a good idea to meet with your accountant regularly to ensure remittance is accurate and complete — even if
they’re the ones to make a mistake, your business is on the hook.

The bottom line
Success in small business means having a team you can rely on — and paying them on time, every time to earn their trust. But managing payroll for
Canadian SMBs can seem daunting, difficult and overwhelming. With our guide to calculating payroll tax in hand — and potentially some outside
assistance — you can meet payroll expectations, keep employees happy and ensure CRA compliance.

Employee home office expenses: Special rules for 2020 claims

With millions of Canadians working from home in 2020, the Canada RevenueAgency (CRA) is bracing for an onslaught of new home office expenseclaims. Learn about the special rules for making these claims.

 

RECENTUPDATES

February11, 2021

Update on home office expenses and form T2200

CPACanada (/en)

 

The CRA has responded to us on a number of outstanding questions relating to home office expenses. Here is our latest update:

Claiming home internet access fees

One common question that has arisen is how to calculate the amount of internet access fees that relate to employment. The CRA’s calculator prorates these costs based on the workspace percentage.

The CRA has confirmed that if an employee wants to use a different method to calculate the employment-use portion of their home internet access fees, they must ensure to meet all the following conditions:

the cost of the internet plan is reasonable

the cost of the internet plan has been divided between employment and personal use on a reasonable basis

the employee is able to substantiate the amount of data used directly in the performance of their employment duties

The employee should include the employment-use portion of the fees calculated under “other expenses” on line 9270 of the T777 or T777S forms. In addition, if using the online calculator, the home internet fees should not be included in the box “Total electricity, heat, water and home internet access fees you paid from” as this total number will be prorated by the workspace at home allocation. As with all other expenses claimed, employees should ensure they maintain appropriate supporting documentation.

Adult child working at parents’ home

The CRA’s website indicates that multiple family members can use the temporary flat rate approach. Given this was unclear, a common situation we asked the CRA to clarify is under what circumstances an adult child living and working at their parent’s home, who meets the pandemic eligibility criteria, can claim a deduction.

In the case of the temporary flat rate method, the CRA recently updated their

FAQs

(https://www.canada.ca/en/revenueagency/services/tax/individuals/topics/about-your-tax-return/taxreturn/completing-a-tax-return/deductions-credits-expenses/line-229-otheremployment-expenses/work-space-home-expenses/frequently-askedquestions.html)

indicating that each employee working from home who has paid home office expenses and meets the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses. As the detailed method is based on expenses actually paid by the person, that means that no amount can be claimed under either method if a child is working at home but does not pay for expenses related to the home

In situations where an adult child is working from a workspace in their parents’ home and pays an amount to that parent, the amount will only be considered rent for purposes of subparagraph 8(1)(i)(ii) if the amount was paid for the use of the workspace and the arrangement constitutes a landlord/tenant relationship. Further, the amount so paid must be reasonable in the circumstances. Absent the existence of a landlord/tenant relationship, the amount paid by an adult child in these circumstances would not be considered rent and therefore, no deduction can be claimed under either method.

Interaction with CRA’s $500 reimbursement policy for home office equipment

Many employers are paying reimbursements and have taken advantage of the CRA’s

temporary reimbursement policy (https://www.canada.ca/en/revenueagency/news/2020/12/employer-provided-benefits-and-allowances-cra-and-covid-19.html)

on home office equipment in 2020. For many employers, some of the costs will be for supplies (which would not create a benefit if consumed for work) and others will be for equipment such as desks, monitors, chairs, etc., which are not deductible as employment expenses.

We asked the CRA to confirm that reimbursements solely for home office equipment are not a reimbursement for the purposes of question 2 on Form T2200S.

The CRA has confirmed that if the employer is reimbursed for the purchase of office or computer equipment, all of which are expenses that are NOT eligible to be claimed by the employee as employment expenses, they should indicate “No” for question 2“Did you or will you reimburse this employee for any of their home office expenses? ”on the Declaration of Conditions of Employment for Working at Home Due to COVID-19 (Form T2200S).

Reimbursements of home office supplies

Many employers have reimbursed employees for office supplies and other costs, and in some cases, only to a limit. On the T777S, the CRA states that “You cannot claim any expenses that were or will be reimbursed by your employer.” We asked the CRA to confirm that a deduction can be claimed when the expense was not fully reimbursed.

 

https://www.cpacanada.ca/en/business-and-accounting-resources/taxation/blog/2021/january/employee-home-office-expenses-2020 4/15

The CRA has confirmed that the employee cannot claim any expenses that were or will be reimbursed by the employer. However, they can claim the portion of the eligible expenses that were not reimbursed.

We note that the CRA’s calculator and form T777S does not address this situation, so the amount net of reimbursements should be entered.

Calculating the utilities portion of condo maintenance fees

We highlighted to the CRA that calculating the utility portion of maintenance fees will be difficult for most taxpayers as they will need to obtain and extract information from the condo corporation’s financial statements. To assist with this, the CRA has indicated to us that they will accept that the administrator of the condominium building provides the information from either the current or previous fiscal year, whichever is available at the time of the request.

ORIGINAL BLOG

January 28, 2021

Home office expense claims can be complicated, and with such high volumes of new claims expected due to the increase in people working from home, CPA Canada offered the CRA ideas on ways to help ease the process for employees, employers and the government alike.

We suggested the CRA could do this by:

adopting a simplified set of rules to help employees claim home office expenses

relieving the burden on employers by streamlining the process for providing T2200Declaration of Conditions of Employment forms to their employees

The CRA has acted on both counts.

For 2020 only, the CRA is allowing employees to deduct their home office expenses using a temporary

flat rate method

if conditions are met. Employers do not have to produce T2200 forms for employees who choose to use the flat rate method. Alternatively, employees can choose to use the detailed method, which would allow them to deduct actual home office expenses paid. Under the

detailed method

,employers can provide a special short

Form T2200S, Declaration of Conditions of Employment for Working at Home Due to COVID-19

 

(https://www.canada.ca/en/revenue-agency/services/formspublications/

forms/t2200s.html)

, as long as the pandemic caused the remote work arrangement.

The CRA also simplified the conditions for making claims under both methods.

In this blog, we highlight the key rules and considerations for making these claims. Topics include:

overview of the tax rules for home office expenses

new temporary home office expense claims process

T2200 considerations for employers

We have also raised a number of questions and issues for the CRA to consider. We will provide updates on this page as the CRA responds.

 

OVERVIEW OF TAX RULES FOR HOME OFFICEEXPENSES

Under normal circumstances, employees who want to deduct their home office expenses must meet two main conditions.

First, an employee must be required by their contract of employment to maintain a workspace in their home and pay for the related expenses. Employers attest to this requirement on T2200 forms issued to their employees, and employees are only eligible to claim a deduction if they have this form in hand.

Second, the use of the workspace must meet one of two conditions:

the workspace is where the employee “principally” (more than 50 per cent of the time) performs the duties of their office or employment

the employee uses the workspace exclusively for earning employment income and for regularly and continuously meeting customers or clients while doing their work

These rules have not changed. The changes introduced by CRA are administrative concessions to these rules. Employees who worked at home before the pandemic should follow the

detailed method (https://www.canada.ca/en/revenueagency/services/tax/individuals/topics/about-your-tax-return/tax11/return/completing-a-tax-return/deductions-credits-expenses/line-229-otheremployment-expenses/work-space-home-expenses/how-claim.html#h-2 )

for claiming a deduction for 2020.

 

NEW TEMPORARY CLAIM METHODS FOR HOMEOFFICE EXPENSE

For employees who worked at home during 2020 due to the pandemic, the CRA has temporarily simplified the process by:

relaxing the employment contract requirement and providing a simplified definition of what working principally from home means in a pandemic

allowing employees to claim a temporary flat rate deduction for 2020 if conditions are met, instead of using the detailed calculation

providing extensive online tools, forms and guidance to help employees claim the deduction

The eligibility criteria and calculations for the detailed and flat rate methods are slightly different, as we discuss in the next two sections.

Temporary flat rate method: Eligibility criteria and calculations

Under the temporary flat rate method, employees qualify for a 2020 deduction if they meet all of the following conditions:

worked from home in 2020 due to the pandemic

worked from home more than 50 per cent of the time for at least four consecutive weeks in that year

claim home office expenses only and no other employment expenses

were not fully reimbursed by their employer for all of their home office expenses

The temporary flat rate method allows eligible employees to claim a deduction of $2for each day they worked at home in 2020 due to COVID-19, up to $400. The amount is a substitute for actual home office expenses paid by the employee, such as rent, electricity, home internet access fees, office supplies (e.g., pens, paper) and unreimbursed cell phone costs.

Other points to keep in mind:

 

an employee can qualify even if it was their own choice to work at home because of the pandemic

employees who want to claim other employment expenses, such as employment-related auto expenses, must use the detailed method

an employee who was reimbursed for some but not all of their expenses can use the flat rate method as long as they meet the other conditions

the number of days worked at home due to the pandemic includes both full-time and part-time days but not days off (whether for vacation, illness or another reason)

Although the deduction is limited, the temporary flat rate method has some advantages:

employees choosing the temporary method do not need to have their employers complete and sign a Form T2200 or T2200S, although they should do their best to document how many days they worked at home

they do not need to determine and summarize eligible costs, or keep receipts

Employees must use the

Form T777S, “Statement of Employment Expenses for Working at Home Due to COVID-19” (https://www.canada.ca/en/revenueagency/

services/forms-publications/forms/t777s.html)

to report that they are using the flat rate method and calculate their deduction.

 

Detailed method: Eligibility criteria and calculations

Under the detailed method, employees can claim the employment portion of actual home office expenses paid. Although the rules for 2020 are simplified, the calculations are essentially the same as for employees who are required to work at home more generally.

Under the detailed method, employees qualify for the deduction if they meet all of the following conditions :worked from home in 2020 due to the pandemic or were required to work at home by their employer were required to pay for expenses related to their home workspace and used the expenses directly in their work

either:

worked in their home workspace “mainly” (more than 50 per cent of the time)for at least four consecutive weeks, or

only used their workspace to earn employment income, in particular, for regularly and continually meeting clients, customers or other people while doingtheir work

have received a signed T2200 or T2200S form from their employer

The CRA has confirmed the employer’s requirement for an employee to work fromhome may be a written or verbal agreement. It does not have to be part of theemployment contract. In addition, where an employee could choose whether to workfrom home due to COVID-19, the CRA still considers them to have worked from homedue to the pandemic.

Qualifying employees using the detailed method must first determine the total oftheir eligible expenses overall. They must then prorate these expenses (excludingoffice supplies) based on the portion of their home used for employment, as wediscuss in the next section.

Determining the percentage of workspace at home

To claim the employment portion of actual amounts paid, employees need todetermine the portion of their home used for work based on both size and use(employment versus personal). For common areas, such as a kitchen table, theproration needs to account for both the floor space used for employment and thetime spent.

If a specific space is used only for employment, employees will only need to proratebased on the amount of that space. The CRA provides plenty of

examples andguidance (https://www.canada.ca/en/revenueagency/

services/tax/individuals/topics/about-your-tax-return/taxreturn/

completing-a-tax-return/deductions-credits-expenses/line-229-otheremployment-

expenses/work-space-home-expenses/work-space-use.html )

fordetermining the percentage of the employee’s home used as a workspace, includingsituations such as common versus designated workspaces, more than one employeeworking in the same home, and changes of workspace during the year.

Eligible expenses

Eligible expenses (https://www.canada.ca/en/revenueagency/

services/tax/individuals/topics/about-your-tax-return/taxreturn/

completing-a-tax-return/deductions-credits-expenses/line-229-other11/

employment-expenses/work-space-home-expenses/expenses-canclaim.

html)

include home office expenses as well as office supplies. Employees mustseparate the expenses between their employment use and non-employment(personal) use.

Eligible home office expenses include electricity, heat, water, utilities, home internetaccess fees (new for 2020), maintenance and minor repairs, and rent. (Commissionedemployees can also claim some other expenses).

Non-eligible home office expenses include mortgage interest, principal mortgagepayments, home internet connection fees, furniture (e.g., office chairs and desks) andcapital expenses (e.g., replacing windows, flooring and furnace). To determine theamount that is deductible, eligible home office expenses are prorated by percentageof the home used as a workspace (discussed above).

Where an employer requires the employee to pay for office supplies or certain phoneexpenses, the employee may be able to claim those expenses. The CRA’s websiteincludes a comprehensive list of eligible and ineligible supplies. Eligible supplies donot need to be prorated like other home office expenses.

In general, to be eligible, the cost of supplies must relate to things that are consumedwhen doing work, such as paper or ink. The costs of more permanent items likecalculators and computer cables are not deductible as office supplies, even thoughthey are relatively inexpensive. The CRA is quite strict in applying these rules.

Calculating eligible home office expenses

Once the proration factor for costs other than supplies and total costs has beendetermined, the employee can then determine the portion of each type of cost that iseligible for deduction. When doing the calculation, only expenses incurred during thework-from-home period(s) qualify.

For employees using the detailed method, the CRA provides guidance to helpdetermine

eligibility (https://www.canada.ca/en/revenueagency/

services/tax/individuals/topics/about-your-tax-return/taxreturn/

completing-a-tax-return/deductions-credits-expenses/line-229-otheremployment-

expenses/work-space-home-expenses/who-claim.html ),

employment use of workspace (https://www.canada.ca/en/revenueagency/services/tax/individuals/topics/about-your-tax-return/taxreturn/completing-a-tax-return/deductions-credits-expenses/line-229-otheremployment-expenses/work-space-home-expenses/work-space-use.html)

and eligible expenses (https://www.canada.ca/en/revenueagency/services/tax/individuals/topics/about-your-tax-return/tax-return/

completing-a-tax-return/deductions-credits-expenses/line-229-otheremployment-expenses/work-space-home-expenses/expenses-can-claim.html). The CRA also offers an

online calculator (https://www.canada.ca/en/revenueagency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-229-otheremployment-expenses/work-space-home-expenses/calculate-expenses.html)

that guides users through the process of computing the home office expense deduction under the detailed method, including prorated amounts.

One common question is how to calculate the amount of internet access fees that relate to employment. The CRA’s calculator prorates these costs like other costs such as electricity or heat (i.e. based on the home work space percentage). In a December2020 Question and Answer session, the CRA confirmed they would allow employees to use another reasonable method for this calculation but did not specify what other methods would be acceptable. Since internet use is hard to track and billing methods vary, it is not clear how an alternative approach would be documented.

Another thorny issue relates to condominium fees. The CRA has stated that employees can claim the portion of these fees that relate to electricity, heat and water consumed in a condo unit owned by the employee using a reasonable basis. The CRA then describe an approach where an employee can use costs obtained from the condominium administrator.

Obtaining this information and calculating an amount may not be straightforward, so we have asked the CRA to ease the process by allowing employees to use a reasonable estimate for claiming condo fees.

Employees who use the detailed method need to maintain documentation to support their home office expense claim, and have a signed copy of either Form T2200S orT2200 at the time they make their claim.

Employees claiming both home office and other employment expenses (such as automobile deductions) should use

Form T777 Statement of Employment Expenses

(https://www.canada.ca/en/revenue-agency/services/formspublications/

forms/t777.html )

. Employees claiming home office expenses only should use the simplified

Form T777S (https://www.canada.ca/en/revenueagency/services/forms-publications/forms/t777s.html )

Which method produces the best result?

 

Like many things in tax, the best approach should be determined case by case, based in part on the answers to these questions.

Do you rent your home?

Under the detailed method, renters generally have higher eligible expenses than homeowners. Mortgage interest is generally not deductible, and costs such as insurance and property taxes are only eligible for commissioned employees. However, such expenses are indirectly reflected in rental payments, sothe total expense that renters use as a starting point is usually much higher.

Do you own your home?

Although $2 per day doesn’t sound like much, if your actual eligible costs are mainly limited to utilities and internet, then your actual prorated cost may be in this ballpark.

What is a reasonable internet amount?

As discussed, the CRA’s calculator prorates internet costs based on floor space usage in the same way as other costs. If an alternative but reasonable approach is used, this could result in a somewhat higher deductible amount than the fixed rate approach.

Do you qualify under one method but not the other?

Some employees may be eligible for one method but not the other. For example, an employee who also wants to claim automobile expenses must use the detailed method.

Which method is simpler and costs less?

If you qualify, the fixed rate method is simpler to use and no T2200 is needed. If you use a practitioner to prepare your tax return, the fees may be lower depending on how you are charged and the work involved to make a detailed claim.

Changing prior-year returns for unclaimed home office expenses

With all the talk of home office expenses, some employees may realize they could have been claiming these expenses in past years.

Currently, however, the temporary flat rate method and the simplified T2200S andT777S forms are only allowed for the 2020 tax year. For previous years, employers and employees must meet the general conditions and complete the T2200 and T777forms that applied to those years.

Individuals can ask to change a return (https://www.canada.ca/en/revenueagency/services/tax/individuals/topics/about-your-tax-return/change-your return.html)

for tax years ending in any of the 10 previous calendar years (i.e., as farback as the 2010 tax year), applying the rules in place for home office claims in each of those taxation years.

 

T2200 CONSIDERATIONS FOR EMPLOYERS

After the CRA introduced the simplified T2200S form, employers raised a number of concerns with us. Here are some of the most common issues we heard:

Which form?

As discussed, a T2200 or T2200S is only needed for employees who want to use the detailed method. If the employee worked from home only because of the pandemic, the T2200S can be provided to them. For employees who have additional expenses, such as working from home generally (i.e. before the pandemic hit), travel expenses or other costs, then the regular T2200 is required. The CRA updated the

T2200 on January 18 (https://www.canada.ca/en/revenue-agency/services/formspublications/forms/t2200.html)

, but unfortunately, it did not include the new home office wording from the T2200S on the T2200. On the revised T2200, the home office question is “Did this employee’s contract of employment [under the contract itself or in a separate written or verbal agreement] require them to use a portion of their home for work?” We asked the CRA for guidance where an employee worked at home due to the pandemic only but also had other deductible employment expenses. In such a situation, we believe the best approach is to complete the T2200 for non-home office expenses only (i.e. don’t answer question 10 and the related information)and provide the employee with a T2200S in the same manner as other employees to cover off home office expenses. We are awaiting comments from the CRA on this issue, but we believe our suggested approach is reasonable.

Employers’ responsibilities

As discussed, employees who want to use the detailed method must have a T2200 or a T2200S. Employers will need to decide whether to go ahead and provide the form(generally, T2200S) to any employee who could be eligible to use the detailed approach, or whether they will only provide the form to employees who ask for it.

Electronic signatures

The CRA requires an employer to have an authorized person sign the T2200S orT2200 and provide their contact details. The CRA will accept electronic signatures on these forms for 2020. Employers who plan to provide T2200S forms to all eligible employees may be able to partly automate the process by merging the names and answers to the questions for each eligible employee into a pre-signed template form.

 

Authorized person

According to the CRA (https://www.canada.ca/en/revenueagency/services/tax/individuals/topics/about-your-tax-return/taxreturn/completing-a-tax-return/deductions-credits-expenses/line-229-otheremployment-expenses/work-space-home-expenses/how-claim.html )

, determining who is an authorized person for purposes of certifying the T2200 and T2200S forms is up to the employer’s discretion. The CRA does not require the form to be signed by an authorized “officer”. The authorized person’s contact information is required to be included in case the CRA would like to follow up, and employers should consider this when determining who should certify the form.

Employees who were already required to work from home

The new measures do not affect employees who worked from home before the pandemic and claimed the related expenses. Employers should follow their existingT2200 process for these employees.

UPDATES FROM THE CRA

As noted earlier, we are waiting for answers from the CRA on a number of questions. We will update this blog as we receive updates, so check back regularly for the latest news on home office deduction claims for 2020. We will also highlight any changes to this blog on our

Federal Government COVID-19 Tax Updates (/en/business-and-accounting-resources/taxation/canadian-tax-news)

page.

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NOTE:

The commentary function of this page has been temporarily closed. Unfortunately, because of the volume of feedback regarding recently announced COVID-19 tax measures, we do not have the capacity to respond to individual

 

inquiries. We strongly encourage you to visit our

Canadian Tax News and COVID-19Updates page (/en/business-and-accounting-resources/taxation/canadian-tax-news)

for information.

About the Author

Bruce Ball, FCPA, FCA, CFP

Vice-president, Taxation, CPA Canada-