Canadians working from home: you can recover up to $500 on your taxes

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Ah, working from home. There is nothing like it, is there? There’s no traffic to stress over, more flexibility in your schedule, and the freedom to wear whatever you want – er, under the camera.

But working from home can also help you pay your taxes. This year, the CRA will allow you to deduct up to $500 from your taxable income if the pandemic forces you to work from home in 2021. Let’s take a look at this tax relief and see if it may apply to your situation.

How it works?

If you worked from home in 2021 because of the pandemic, you can deduct $2 for each day you worked remotely. For those who worked from home every day, that amounts to $500 (or 250 business days).

The tax rebate is essentially a tax deduction. You’ll take $500 off your taxable income, reducing the total amount you owe in taxes.

A word of caution: if your employer covers your work-from-home expenses, you won’t qualify for this tax break. Otherwise, you can deduct $2 for each day you worked from home.

Why is the CRA doing this?

It all started in 2020. As more and more Canadians started working from home, the CRA realized that home-related expenses were likely to increase. Electricity, water, heat, Internet charges, and even the “wear and tear” on a house likely cost Canadians more.

To help Canadians with these costs, the CRA introduced a simplified home office tax deduction, providing Canadians with a certain amount of money for each day they worked at home.

In February 2022, the CRA announced that it would continue this simplified method, although it now grants up to $500, up from $400 in 2021.

What happens if my expenses exceed $500?

The CRA offers two methods for you to claim this deduction. You can use the flat rate method, which gives you $2 for each day you worked from home. Or you can use the “detailed form” method, which takes longer but may give you a higher refund.

If you worked more than 250 days from home last year or your expenses exceeded $500, I would use the detailed form method. It will take time (a lot of time), but in the end, it might be worth the time spent.

In fact, some Canadians might to have to do the long form method. The short form method applied to Canadians working from home due to the pandemic. But if your job requires you to work from home (as if you were working from home before the pandemic), you’ll need to use the detailed form method to claim your deduction.

For those using the short form method, be sure to calculate how many days you worked from home. Part-time and full-time days count, but not sick days, days off and vacations.

Finally, if you are unsure of your taxes this year, do not hesitate to contact a tax specialist. This might not be a bad idea, especially if you had a side hustle or indie gig last year.

Maria D. Ervin