Working from home as an employee: T2200 and T777

The flat rate is gone; the detailed method is what remains

During 2020, 2021 and 2022 the CRA allowed a temporary flat rate of $2 for each day worked from home because of the pandemic, with no receipts and no employer form. That method does not apply to 2023 or any later tax year. For a 2026 return, which is filed in 2027, an employee who worked from home can only use the detailed method: you claim the employment-use share of the actual amounts you paid, and you support the claim with documents.

If you are self-employed, none of this applies to you. Business-use-of-home expenses follow different rules and are reported on a different form.

Confirm you qualify before you collect receipts

The CRA requires you to meet every one of its conditions. Your employer must have required you to work from home. That requirement can be written or verbal and does not have to be in your employment contract, and an employee who voluntarily enters a formal telework arrangement with their employer is treated as required. You must also have been required to pay for expenses related to your work space, and those expenses must be used directly in your work.

On time at home, one of two things must be true. Either you worked more than half of your time from the home work space for a period of at least four consecutive weeks, or you use the space only to earn employment income and use it regularly for in-person meetings with clients, customers or others. If you have more than one qualifying period in a year, you can claim each. Only the costs for the qualifying period count, so if your arrangement ended or changed partway through the year, you cannot claim the whole year.

A part-time employee who is asked to work from home one day a week, and so never works more than half of their time at home for four weeks in a row, generally does not qualify. Expenses your employer reimbursed, or will reimburse, cannot be claimed.

Ask your employer for Form T2200

Form T2200, Declaration of Conditions of Employment, is completed and signed by your employer. It certifies the conditions of your employment, including that you were required to pay for certain expenses. It is up to your employer to decide who is authorized to sign it.

Ask early, because an employer may need time to complete the form and may have its own request process. You do not send the form to the CRA with your return. You keep it, along with your receipts, in case the CRA asks to see it. Without a signed form, the detailed method is not available, so a claim built on receipts alone is at risk.

A practical tip: tell your employer which tax year you need the form for, and ask whether the arrangement changed during the year, since a change in your schedule changes the period you can claim.

Which expenses salaried and commission employees can claim

All employees, salaried or on commission, can claim the employment-use share of electricity, heat and water, the utilities portion of condominium fees, a reasonable monthly home internet plan, maintenance and minor repairs, and rent if you rent the home where you live. Office supplies that are used up in your work, such as paper, pens, ink and toner, can be claimed in full to the extent they are used for work. A basic cell phone plan can qualify if it is reasonable, split between work and personal use, and you can show the minutes or data used for your duties, and long-distance calls made for work also qualify.

Commission employees who sell goods or negotiate contracts, usually shown by an amount in box 42 of the T4, can also claim home insurance, property taxes and the lease of items such as a phone or computer that reasonably relate to earning commission income. Their total work-space claim is generally limited by the commission income they earned.

Nobody can claim mortgage interest, mortgage principal, furniture, capital items such as new windows or flooring, or the rental value of a home they own. Internet connection fees and the modem or router lease portion do not qualify. Salaried employees also cannot claim the purchase of a computer, chair, printer or software, and a basic land-line rate is not claimable.

Work out your work space percentage

Divide the size of your work space by the total finished area of your home, which includes hallways, bathrooms and the kitchen, then multiply by 100. If the room is a designated room used only for work, that percentage is your employment use. If you work at a shared space such as a kitchen table, multiply the space percentage by the share of the week you work there, hours worked divided by 168 hours in a week. Forty hours is about 23.8 percent.

If you or your spouse both work from home, each expense can be claimed only once between you, so decide who claims what before filing.

An illustrative Form T777 calculation

This example is illustrative only. A salaried employee rents an apartment and was required to work from home for all 12 months. A spare room used only for work measures 12 square metres, and the finished area of the home is 96 square metres, so the work space is 12.5 percent of the home.

Over the year the employee paid $18,000 in rent, $1,200 in electricity and $1,200 in internet, a total of $20,400. The employment-use amount is $20,400 multiplied by 12.5 percent, which is $2,550. Printer paper and toner used for work come to $150 and go in the office supplies section of the form. The total entered for the claim is $2,700.

Complete Form T777, Statement of Employment Expenses, and enter the result on line 22900 of the return. You file the T777 with the return but not your receipts or the T2200. The deduction lowers taxable income, so the tax it saves depends on your marginal rate. It also cannot create or increase a loss from employment, although an amount you cannot use in one year can generally carry forward while you report income from the same employer.

Keep your records for six years

Keep the signed T2200 and every receipt or supporting document for six years. Useful extras are a floor plan with measurements, dated notes of the period you were required to work from home, and a note of any reimbursement from your employer. If the CRA reviews your claim, a tidy file that ties each line of the T777 to a document ends the review quickly.

If your situation is unusual, such as a move during the year, a condominium, or commission income combined with other employment expenses, ask an accountant to check the calculation before you file.