Hundreds of Thousands of Canadians May Receive a Tax Break for Working from Home During Pandemic

With “Working from Home” measures recommended for the foreseeable future, should Canadians get a tax break for working in the comfort of their own homes?

Since the pandemic began and workplaces began to close in the middle of March, hundreds of thousands of Canadians have been working from home and could be eligible for a tax deduction. 

While it is still unsure how much of a tax deduction would be claimable, tax experts are saying it could depend on both the employers and how the Canada Revenue Agency (CRA) deals with a series of questions raised by sudden changes that forced millions of Canadians to work from home. 

Armando Minicucci, a partner with the accounting firm Grant Thornton, said that he expects a large increase in the number of Canadians who are eligible to claim a tax deduction for turning a part of their home into an office. 

“I would say the number would have to be in the hundreds of thousands,” he said.

The tax deduction that Mr. Minicucci is referring to is called the “work-space-in-the-home” deduction. 

Individuals could file a claim for the deduction if they work from home more than 50 percent of the time and or if they have a separate home office and use it to meet clients. 

In either case, the employer will have to certify that the individual is working from home is a condition of their employment. 

According to the CRA, more than 174,210 Canadians took advantage of the “work-space-in-the-home” deduction on their 2018 tax returns, claiming an average of $1,561 per person. 

Tax experts say that the deduction allows those who qualify for it to reduce their tax bills by claiming a portion of their household expenses – such as utilities, cleaning and rent. 

How Did the COVID-19 Pandemic Change Things? 

While normally, before the pandemic, the number of people who can claim the deduction is limited due to the requirement for an individual to be working from home for more than 50 percent of the time or having to use a home office exclusively for work and regularly meeting clients. 

However, since the initial spread of the COVID-19 virus began in March, public health officials urged Canadians to stay home as various levels of government-issued orders to close non-essential businesses across the country. 

While unfortunately for some this meant that they either work fewer hours or lost their jobs completely, many fortunate Canadians were able to work from home as employers across the country provided opportunities to work remotely. 

According to Statistics Canada’s June Labour Force Survey, about 3.3 million Canadians had moved out of their regular workplaces and were working from home by mid-April. 

Despite the reported drop of 400,000 in the number of Canadians working from home, there are millions of Canadians still working from home. 

By September of this year, it would have been almost half a year since Canadians first started working from home in March, which may put them in a position to qualify for the tax deduction. 

“We’re getting further and further along in this pandemic where a lot of employees are going to have exceeded the six-month mark, and in that situation, they should qualify,” said Mr. Minicucci.

“But for those employees that have not worked the full six months or more at home, there’s a question with respect to whether or not they meet the eligibility criteria.”

Regarding the eligibility of those who have not worked the full six months or more at home, Canada’s tax experts are saying that the CRA needs to provide further clarification to ensure everyone eligible for the tax deduction is aware of their benefits. 

No Rule Changes Planned, Says Finance Department

According to officials from both the CRA and the Finance Department, there are no plans currently to change the rules regarding the “work-space-in-the-home” tax deduction. 

The Federal Director of the Canadian Taxpayers Federation believes that those who have been working from home since the start of the pandemic should be allowed to claim the deduction saying: 

“The deduction exists for a reason — to defray work-related costs that just happen to be home-related and if that reason now applies to a broader class of people, they should be able to make use of it.”

Conservative revenue critic Marty Morantz has been calling on the government to clarify its plans for the deduction after he too believes that Canadians working from home should be eligible for the deduction. 

“I think it would be very reasonable for the government to say to folks who were doing their best to comply during the crisis by working at home, and incurring expenses, that they should have the opportunity to claim the deduction,” he said.

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