Home Office Tax deductions

Home Office Renovation Tax Deduction Canada

What is the Home Office Renovation Tax Deduction Canada?

Are you looking for some last-minute tax deductions before we roll over into 2021?  You have probably spent some money this year to work from home, so find out what you can and can’t deduct.

Let’s Work from Home they Said…

Are you working more from home and looking for a home office renovation tax deduction in Canada?

So many people are now working from home, either as an employee of a company that no longer has an office or as a business owner working from home.  Residential renovations have become the order of the day.

As changes to the workplace have taken effect in 2020, more people are working from home and having to adjust their space to suit their new work life.

How does this affect you?

It likely means that you have had to rearrange some furniture or whole rooms in your home.  It also likely means that you have had to acquire some home office furniture or equipment to make working from home a reality.  It also likely means that you are looking for ways to save money, even if that means maximizing your tax deductions for 2020 in the hopes of a bigger tax return in 2021.

If you were forced to work from home, look after someone like a dependant child or sick relative there will be additional tax breaks for you this year.

If you purchased equipment for your home office or did a renovation upgrade to provide an adequate working space there will also be additional tax breaks for you, especially if you are a sole proprietor or business owner.

Bedrock Can Help – If you are looking for a home office renovation, or help to design and create an appropriate space for your home office let us know.  We would love to help you get an inspiring space at home to work from.

Home Office Renovation Tax Deductions

Home office renovation costs may be tax-deductible for self-employed individuals. However, renovations are capital investments, not expenses. You can only claim them as CCA. Tax experts don’t recommend claiming the CCA on a home office, because it eliminates the tax-exempt status of that part of your home!

Assuming the home is your principal residence, your CCA claim for a few thousand dollars could result in a nasty surprise: capital gains tax in the tens of thousands, depending on the value of your home when you sell it.

If you still want to proceed, here’s what you could claim:

  • If you’re only renovating your home office, you can claim the entire renovation cost as CCA
  • If you’re renovating the entire home, you can only claim the portion related to the home office
  • If you’re renovating part of your home, not including your office, you can’t claim any CCA

The Government of Canada Covid Tax Resources.

Eligibility

You are eligible to claim a deduction for home office expenses for the period you worked from home if you meet all of the criteria:

  • you worked from home in 2020 due to the COVID-19 pandemic or your employer required you to work from home
  • you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020
  • have a completed and signed Form T2200S or Form T2200 from your employer (only applicable if the detailed method is used to complete the claim)
  • the expenses are used directly in your work during the period

The use of a shorter qualifying period will ensure that more employees can claim the deduction than would otherwise have been possible under longstanding practice.

New temporary flat rate method

The new temporary flat rate method simplifies your claim for home office expenses. You are eligible to use this new method if you worked more than 50% of the time from home for a period of at least four consecutive weeks in 2020 due to the COVID-19 pandemic. You can claim $2 for each day you worked from home during that period plus any additional days you worked at home in 2020 due to the COVID-19 pandemic. The maximum you can claim using the new temporary flat rate method is $400 (200 working days) per individual.

Each individual working from home who meets the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses. This means multiple people working from the same home can each make a claim.

This method can only be used for the 2020 tax year.

Simplified process for the temporary flat rate method

You do not have to: calculate the size of your workspace, keep supporting documents or get Form T2200 completed and signed by your employer.

Source – https://www.canada.ca/en/revenue-agency/news/2020/12/simplifying-the-process-for-claiming-a-deduction-for-home-office-expenses-for-employees-working-from-home-due-to-covid-19.html

The Canada Training Benefit

If you have to work from home and you have had to, or want to, get some additional technology training there is some additional benefits for that.  Often when people don’t have an IT department anymore they have to figure out their technology on their own.

The federal government introduced the Canada Training Benefit to help with disruption in the labour force due to changes in technology. This refundable tax credit is designed to lower the barrier to professional development and to provide financial support to help pay for half of the tuition and training fees. As a worker, you’ll be eligible to receive up to $250 annually as a tax credit. This amount goes into a notional account, which the worker can use for eligible purposes.

To be eligible to accumulate $250 in a year, you must meet the following criteria:

  • File a tax return for that year
  • Be at least 26 years old and no older than 65 years old at the end of the year
  • Be a Canadian resident during the year
  • Have eligible earnings of a minimum of $10,000 and a maximum of $150,000 in the year (this includes employment, self-employment, and maternity and parental benefits)

To help make it easier to keep track of your notional account balance, it will be communicated each year on the Notice of Assessment you receive from the Canada Revenue Agency (CRA) after you file your income taxes. In any given year you can claim the lesser of the balance in your notional account and half of eligible tuition and fees paid in the year.

Source – https://www.greedyrates.ca/blog/tax-changes-canadians-need-to-know-about/

Home office renovation costs may be tax-deductible for self-employed individuals. However, renovations are capital investments, not expenses. You can only claim them as CCA. Tax experts don’t recommend claiming the CCA on a home office, because it eliminates the tax-exempt status of that part of your home!

Assuming the home is your principal residence, your CCA claim for a few thousand dollars could result in a nasty surprise: capital gains tax in the tens of thousands, depending on the value of your home when you sell it.

If you still want to proceed, here’s what you could claim:

  • If you’re only renovating your home office, you can claim the entire renovation cost as CCA
  • If you’re renovating the entire home, you can only claim the portion related to the home office
  • If you’re renovating part of your home, not including your office, you can’t claim any CCA

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