Delean: Simple formula gives modest tax break when working from home


For those who opt for the detailed formula, deductions can be higher, but there are lot more strings.

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Working from home has simplified life for many Quebecers in the almost three years since COVID-19 entered the lexicon.

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It also has provided some tax relief.

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For most, however, those tax breaks have been modest.

That’s because, in general, household expenses are deductible only in certain cases and limited amounts for salaried employees working from home.

The formula is so complicated most people automatically default to the simplified flat-rate system introduced “temporarily” by Canada Revenue Agency and Revenu Québec for the 2020 tax year and maintained ever since.

The simplified formula allows employees a deduction of $2 per day worked from home during the calendar year, to a maximum of $500, provided you worked from home at least 50 per cent of the time for at least four consecutive weeks during the year.

Statutory holidays, sick days and vacation days aren’t part of the calculation.

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The deduction results in a tax saving that varies from person to person, according to tax bracket. Someone with taxable income of $55,000 who claims the full $500 will save about $100 on both their federal and provincial returns.

For those who opt for the detailed formula, deductions can be higher, but there are lot more strings.

First, you’ll need a signed form from your employer confirming it’s a condition of the job.

You can deduct part of your rent and household bills such as electricity and heat, but only in proportion to the area occupied by your workspace, for the number of hours a week that it’s for employment use.

The tax department says the size of the work area “must be reasonable.”

If you’re using your kitchen or family room, the actual deduction allowed will be pretty scant.

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Internet access fees and cellphone plans are deductible — in an amount proportional to their business use — but cellphone activation and internet connection fees are not.

You can expense the cost of new paint for a room, but only if it’s your workspace at home.

Office supplies are deductible, office equipment is not. Furniture, wall decorations, electronics, landline phones, a router lease or mortgage payments (principal or interest) also are not deductible.

Commission employees have a few more options than salaried workers — they can deduct a portion of their municipal taxes and home insurance — but their workspace-in-home expenses cannot exceed the amount of commission income they earn.

Using the detailed method also means keeping receipts for all the claimed expenses for at least six years.

The simplified method requires no supporting documents.

The Montreal Gazette invites reader questions on tax, investment and personal finance matters. If you have a query, please send it by email to Paul Delean at [email protected]

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