Millions of employees currently find themselves working from home in 2020 as a result of the Covid-19 pandemic. Some employees, who may have had inadequate home office furniture — or, perhaps more commonly, may be lacking a large-screen monitor, a proper headset for Zoom calls and a full-sized keyboard — have ended up shelling out their own cash to upgrade their home offices.
Some home-office workers, however, were fortunate in that their employers stepped up with cash reimbursements to help lighten the load on their employees. This begs the question as to whether those reimbursement amounts need to reported in 2020 as a taxable benefit from employment.
In April 2020, the CRA issued a technical interpretation dealing with employee taxable benefits that employees may have received as a result of having to work from home due to Covid-19. The CRA was asked whether an allowance paid by an employer to an employee for the purpose of acquiring equipment to enable them to work from home would be considered a taxable benefit to the employee. The CRA was also asked whether its response would be different if the amount paid by the employer is conditional on a proof of purchase being submitted by the employee.
The CRA indicated that a general allowance paid to an employee would be considered a taxable benefit, but that for a specific reimbursement, it will depend on whether the items being reimbursed primarily benefit the employee. In the context of the Covid-19 pandemic, the CRA is willing to accept that the reimbursement of an amount up to $500 for the purchase of personal computer equipment “primarily benefits the employer, so that it does not result in a taxable benefit.”
At the Canadian Tax Foundation’s annual conference held in late October 2020, the CRA, during its annual roundtable session, provided a bit of good news when responding to a question dealing with the reimbursement of computer and office equipment by employers.
The CRA was first asked whether the $500 reimbursement amount would be increased. The CRA stated that there are no current plans to increase the $500 reimbursement amount, but that it would “continue to carefully monitor all developments relating to the Covid-19 pandemic and will take further action as necessary.”
The CRA was then asked whether its position on the amount reimbursed for the purchase of personal computer equipment would be expanded to include the purchase of home office furniture, such as desks, chairs and so forth. At the roundtable, the CRA announced that it was extending its administrative position to employer reimbursements for home office equipment (for example, a desk, office chair, etc.) purchased by employees.
The CRA also clarified that the $500 reimbursement amount is the maximum for each employee, rather than for each piece of computer or office equipment that an employee may purchase. For example, if an employee purchases a large-screen monitor for $400 and an office chair for $250, the employer can reimburse the employee up to $500 without the employee receiving a taxable benefit under the CRA’s new administrative position. If, however, the employer chooses to reimburse the employee for the full $650, the amount over $500 (that is, $150) would have to be included in the employee’s income.