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A client whose employer required working from home during the pandemic may be able to claim expenses related to the client’s home office this year.

Doing so is permitted if a home office is where an employee principally — meaning more than half the time — performs their job or if the home office is used exclusively for the purpose of earning income and for meeting with customers on a regular or continuous basis.

“Many Canadians have met or will meet that [first] ‘principally working from home’ [test] for 2020,” says Rebecca Hett, vice president of tax, retirement and estate planning with CI Investments Inc. in Calgary.

Eligible expenses include heating fuel, supplies, utilities, repairs and maintenance. Employees who are paid on commission also can expense home insurance and property taxes for a home they own. Mortgage interest and depreciation are not deductible.

An employee working in a rented residence can deduct the percentage of rent and maintenance costs related to that workspace.

Expenses must be allocated in the same proportion the workspace occupies in the home. For example, if 15% of the home is used for the home office, 15% of eligible expenses can be claimed.

However, the proportion of allowed maintenance expenses varies: expenses incurred on a part of the house not used for the office space can’t be claimed, while those incurred exclusively for the office space may be claimed in full.

Employees can deduct workspace expenses from only the income to which the expenses relate. Any expenses from 2020 that aren’t deducted in that tax year can be carried forward to the following year, as long as the employee is reporting income from the same employer.

In order to claim these expenses, an employee must have their employer complete and sign Form T2200: Declaration of Conditions of Employment, which attests that the employee was required to work from home.

“I would absolutely encourage any employee who met, or thinks they will meet, that threshold of working principally from home for 2020 to approach their employer as soon as possible, and talk to them about [obtaining a completed Form T2200],” Hett says.

However, Hett and other tax practitioners anticipate employers will be flooded with requests for completed Form T2200s. In September, the Canada Revenue Agency (CRA) consulted with the business community about a draft of a shortened Form T2200 to simplify the process.

“It remains to be seen if this draft Form T2200 becomes the final form or whether there are going to be further changes,” says Jonathan Braun, senior manager, tax and estate planning, with IG Wealth Management in Winnipeg.

Braun says it’s unclear whether the “principally working from home” test will apply to those who worked from home for less than six months: “Do we interpret the word ‘principally’ to refer to ‘principally through the entire year’ or, in the case of the Covid-19 pandemic, can we interpret that to say it is ‘principally during, say, April to August’ — when many people were working from home most of time?”

Business groups have been asking the CRA for “more clarity on how these provisions are going to work through 2020,” Braun says.