With the increasing number of people working from home due to the COVID-19 pandemic, there has been a growing interest in the ability to claim home-office expenses as tax deductions. However, the Canadian Revenue Agency (CRA) has recently implemented new rules that make it more challenging to qualify for and claim these expenses.
In this blog post, your professional accountant in Burnaby from Business 360 CPA will delve into the changes to the home-office expense rules that Individuals and employers must be aware of and comply with these changes to maximize the work-from-home tax credit 2023.
Background: Previous “Simplified Method”
Until recently, individuals could utilize a simplified method for claiming home-office expenses. This method allowed for a straightforward calculation based on the number of hours worked from home. However, this article highlights that the CRA has eliminated this simplified method, leading to a more complex process for claiming such deductions. Let’s explore the changes to CRA rules here and if you need more customized advice book your consultation with Business 360 CPA serving as your professional accountant in Burnaby.
Changes to Home-Office Expense Rules
The CRA has introduced new requirements and procedures when it comes to claiming home-office expenses. Let’s take a closer look at these changes:
1. Tracking and Tallying Actual Expenses: Under the new rules, individuals will be required to track and tally their actual expenses associated with working from home. This includes costs such as utilities, internet, and office supplies. It is important to keep detailed records and receipts to support these expenses when filing tax returns.
2. Prorating Expenses: To claim home-office expenses, individuals must prorate the expenses based on the proportion of their home used for work purposes. This means determining the percentage of your home that is used as an office space and applying that percentage to the total expenses incurred.
3. Criteria for Qualifying for Deductions: To claim home-office expenses, certain criteria must be met. The primary requirement is that a portion of your home is used exclusively for work purposes on a regular and ongoing basis.
- Use of a Part of Your Home for Work: The area of your home used for work purposes must be dedicated solely to work-related activities. This means it should not be used for personal purposes, such as a shared space or a dual-purpose room.
- Restrictions and Guidelines: The CRA has outlined certain restrictions and guidelines to determine whether a home office qualifies for the tax credit. This includes requirements regarding the suitability of the workspace, the nature of the work being performed, and the frequency of its use.
Types of Work from Home Expenses That Can Be Claimed
When claiming the work from home tax credit, various eligible expenses can be included. These may comprise:
1. List of Eligible Expenses
- Utilities (e.g., electricity, heating, water)
- Internet and phone bills
- Office supplies and equipment
- Maintenance and repairs
- Rent or mortgage interest (in certain cases)
2. Examples and Explanations
To provide a better understanding, here are some examples of eligible expenses:
- Internet bills directly associated with work-related tasks
- Office supplies like printer ink, paper, and stationery
- A portion of your utilities that can be attributed to your home office space
Necessary Documentation for your work from home expenses
To claim the work from home tax credit, it is crucial to have the necessary documentation in place. This includes:
- Signed CRA Form from the Employer: Individuals need a signed CRA form from their employer to validate their eligibility for the tax credit. Employers must provide this form, which certifies that the employee was required to work from home during the specified period.
- Importance of Employers Providing Required Paperwork: Employers play a vital role in supporting their employees’ claims for home-office expenses. Employers need to understand the new rules and provide the necessary paperwork, as it is a requirement for employees to substantiate their claims.
To learn more in detail about the required documentation get in touch with the Business 360 CPA’s professional accountants serving in Burnaby and other surroundings in Greater Vancouver.
Business 360 CPA in Burnaby shares how to calculate the work from home tax credit deduction
Calculating the deduction for home-office expenses can be a complex process. Here is a step-by-step guide:
1. Determine Total Expenses Incurred: Start by calculating the total expenses incurred for the specified period, including utilities, internet bills, office supplies, and any other eligible expenses.
2. Determine the Percentage of Home Used for Work: Measure the area of your home dedicated to your home office and determine the proportion it represents concerning the overall size of your residence.
3. Prorate the Total Expenses: Apply the determined percentage to the total expenses incurred to calculate the portion that can be claimed as a deduction.
4. Include the Deduction on Your Tax Return: When filing your tax return, make sure to accurately report the calculated deduction for home-office expenses in the appropriate section.
Claim your work from home tax credit today with your professional accountant in Burnaby
Don’t miss out on potential tax deductions for your home-office expenses. Take the necessary steps to claim what you are eligible for and ensure you are maximizing the work from home tax credit within the bounds of the new rules.
Start reviewing your expenses, organizing your records, and reaching out to your employer to obtain the required paperwork. If you need expert guidance and assistance in navigating the new CRA rules regarding home-office expenses and maximizing your work from home tax credit, look no further than Business 360 CPA. Our team of experienced professionals specializes in providing comprehensive tax planning and advisory services.
