Employer Reimbursements for Home Office Equipment

Updated CRA Policy on Reimbursement

Employers can reimburse employees up to $500 for home office equipment, including items such as desks, chairs, and printers, without the amount being considered a taxable benefit. This policy, introduced during the COVID-19 pandemic, remains in effect. However, if an employer reimburses more than $500, the excess amount will be treated as a taxable benefit and included in the employee's income.

For instance:

• If an employee purchases a desk for $450 and a chair for $150, totaling $600, the reimbursement amount over $500 ($100) will be taxable.

Key Points to Note

1. Maximum Limit: The $500 limit applies per employee, not per item.
2. Documentation: Employees should retain receipts and invoices for all reimbursed expenses in case of a future CRA review or tax audit.

Claiming Home Office Expenses as an Employee

Eligibility Criteria

To claim home office expenses, employees must meet the following conditions:

1. Required to Work from Home: The employer required the employee to work from home, either due to company policy or a formal agreement.
   • A written or verbal agreement suffices.
   • Employees voluntarily entering into telework arrangements may also qualify.
2. Usage of Workspace: The workspace must meet one of the following conditions:
   • It is the employee's principal place of employment.
   • It is used exclusively for work and on a regular basis for meeting clients or performing job duties.
3. Expenses Incurred: The employee personally paid for expenses directly related to the home workspace that were not reimbursed by the employer.

Methods for Claiming Home Office Expenses

1. Detailed Method

Under this method:

 Employees claim the actual expenses incurred.

•  The expenses must be supported by detailed records, including receipts, bills, and utility statements.
•  Form T2200 (Declaration of Conditions of Employment) signed by the employer is mandatory.
•  

2. Temporary Flat Rate Method

• Important Update: The CRA discontinued the flat rate method for the 2023 tax year. Employees must now use the detailed method to claim expenses.

Eligible Home Office Expenses

The following expenses can be claimed under the detailed method:

1. Utilities: Electricity, heat, water, and the utility portion of condominium fees.
2. Internet Access Fees: A reasonable portion of home internet costs.
3. Maintenance and Repairs: Costs directly related to the workspace.
4. Rent: For employees who rent their home, a proportionate share of rent may be claimed.

Additional expenses for commissioned employees:

1. Property taxes.
2. Home insurance.

Note: Mortgage interest and principal payments are not deductible.

Calculating Home Office Expenses

The amount of expense claimable depends on the proportion of the home used for work purposes:

1. Calculate the square footage of the workspace.
2. Divide it by the total square footage of the home.
3. Multiply the resulting percentage by the total eligible expenses.

Example:

1. Workspace size: 150 square feet
2. Home size: 1,500 square feet
3. Proportion: 10%    

   If total electricity expenses are $2,000, the claimable amount is $200 (10% of $2,000).

Documentation and Record-Keeping

Employees must retain:

1. Signed Form T2200.
2. Receipts for all claimed expenses.
3. Bills and invoices for utility, internet, and maintenance costs.
4. Records of workspace usage and allocation calculations.

Pro Tax Tips for Employees

1. Maximize Reimbursement: Utilize the $500 reimbursement for home office equipment and ensure excess amounts are not taxable.
2. Accurate Records: Maintain detailed logs and receipts to substantiate claims in case of a CRA audit.
3. Seek Professional Guidance: If you’re uncertain about your eligibility or calculations, consult with a tax professional to optimize your claims and ensure compliance with CRA rules.

Conclusion

The CRA’s policies on home office reimbursements and expense deductions provide valuable opportunities for employees working remotely. By understanding the latest rules and maintaining proper documentation, employees can minimize their tax liability while maximizing deductions. For tailored advice and assistance, consult a professional accountant or tax advisor.

This article is written for educational purposes.

Should you have any inquiries, please do not hesitate to contact us at (905) 836-8755, via email at [email protected], or by visiting our website at www.taxpartners.ca.

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