Tax returns are due end of April. Here’s how to cash in on work from home expenses
COVID-19 changed everything about our lives, how we eat, how we move around, how we work, and also, how we file our taxes.
For those working remotely during the pandemic, this may very well be your last income tax return as a work-from-home employee as some workplaces begin recalling staff back into the office. Leo Lou, a tax consultant with AWK LLP says there are a lot of available tax credits people might be missing.
He spoke with the Star and offered some tips on how to cash in on your income tax return this year.
Can I claim work from home expenses?
Anyone who worked from home during the pandemic is allowed to claim up to $500 per person in home office expenses. Canada Revenue Agency (CRA) calls this the temporary flat rate method."
The government defines working from home as someone who spent more than half of their time working remotely at their house, for a minimum of four consecutive weeks.
The revenue agency will reimburse Canadians who worked from home at a rate of $2 per day for up to a maximum number of days. In 2020, people were allowed to claim up to 200 days of working from home, a total of $400.
In 2021 and 2022, the amount increased slightly and people can now claim up to 250 days, for a maximum of $500.
The federal revenue agency says people are only eligible if they have not claimed any other employment expenses on line 22900 and only if their employers have not previously compensated them for the expenses.
What if my home expenses are more than $500?
For some, the cost of working from home includes acquiring a separate office space, increased property taxes, higher mortgage interest, increased staffing and additional expenses that cost significantly more than $500.
They should actually consider the form called the T2200," Lou said. This allows for people to claim back more to help offset the costs associated with working from home, he explains.
While people won't be able write everything off, some expenses that can be claimed include transportation (vehicle costs, gas), entertainment and meals, and utilities associated with the cost of running a home office (internet, property tax, mortgage interest, condo fees).
What if my income fell this year?
If your income fell below $22,944 annually, you may be eligible to get $1,395 back on your tax return. The Canada Workers Benefit (CWB) has been in place prior to the pandemic, but Lou says a number of his clients have applied for the credit to supplement a loss of income over the last two years.
To qualify for CWB, you must earn a working income, be a resident of Canada throughout the year, be 19 years of age or older as of Dec. 31, 2021 or live with your spouse, common-law partner or child.
You do not qualify if you're a full-time student enrolled at a designated educational institution for more than 13 weeks of the year, in prison for at least 90 days during the year, or don't pay taxes in Canada because you're employed as an officer or diplomat of another country (or if you're a family member or employee of someone who is).
What if you're caring for elderly family members?
During the pandemic, Lou says that several of his clients have suddenly found themselves caring for and living with older family members and parents.
If you support a senior parent who depends on (you) to live, there's a caregiver amount available," said Lou. He also explains that if someone is now living with a senior, they may also be able to use their family member's unused available tax credits to help offset their own income.
The government understands the children who support their parents living with them (will) have some financial burden and incur some expenses," said Lou.
The average person is allowed to report an income of $13,808 without having to pay any taxes, Lou says. On top of this, the government also offers an age amount tax credit, a non-refundable tax credit available to people who were 65 or older on Dec. 31, 2021.
The CRA changes it every year to adjust for income and inflation.
If an elderly parent doesn't make any income, and is solely dependent on their children or caregivers in their household, then that $13,800 of allowable credit plus the available age amount tax credit can be transferred to their child's tax return amount, if that child is considered a caregiver living in the same household.
Schools and child care
If families incurred child care expenses, they are eligible for some credit to help with those costs, says Lou. For children six years old and younger, families are able to claim a maximum of nearly $8,000, or $5,000 if the child is between the ages of 7 to 16.
Lou says child care expenses include daycare centres as well as individuals who help you look after your children. He suggests you keep all records and receipts of your child care costs should you be required to provide them to the CRA.
For individual child caregivers, you'll require their name and social insurance number (SIN), Lou says, so that the CRA can verify that individual has reported that child care income.
What if I moved during the pandemic?
A client who submitted his tax paperwork to Lou mentioned he'd recently purchased a home. Leo asked if it was his first time buying, which it turns out, it was. What the client didn't know he was entitled to a first time homebuyer tax credit of around $5,000.
While it's not a huge chunk of change when you consider the cost of buying a home in the current market, but it's still money in your pocket, says Lou.
If you relocated during the pandemic, moving costs associated with relocating for work, school, or personal reasons might also be tax deductible, Lou says.
The criteria is you have to move to a location more than 40 kilometres from your existing one," Lou explained.
Moving expenses don't amount to just moving trucks, says Lou, they can also include the costs associated with buying or selling a new home like agent fees or furniture storage costs.
What's a non-refundable tax credit?
If you're filing your own taxes, Lou reminds people not to forget to apply for the Canada Employment Credit, which totals $1,257 this year. Everyone has a personal amount of about $15,000 so if you earn less than that, Lou says, you typically don't pay taxes.
If you don't owe taxes, then this credit means nothing to you, but if you have taxes to pay then this will reduce your tax for that," according to Lou.
How can you claim medical expenses?
During a global pandemic, many have fallen ill at some point over the last two years. Maybe it wasn't even COVID-19 that had the unfortunate impact on your life but some other ailment that required medical care. Lou says if your medical expenses totalled more than 3 per cent of your income, you may be eligible for some credit on your tax return.
Payments you made to a health professional, including family doctor, dentist, massage therapy, chiropractor, all those registered health professional services you received where you paid them, including the prescription eyeglasses, all those is considered qualified medical expenses," said Lou.
To be eligible, you would've had to have spent more than 3 per cent of your total income or $2,421, whichever amount is less, he adds.
Since families can claim all of their medical expenses together, Lou suggests always having the person who earns less claim for the medical expenses.
Not included as a medical expense are services covered by OHIP or your employer's health insurance company. But the portion you are required to pay out of pocket, the deductible, counts as a medical expense.
What if I'm self-employed?
The last two years has been one of change, upheaval, restructuring in the workplace. The great resignation or the big quit saw people leave the traditional workforce in droves. Some of those people left to start businesses of their own. Some were forced to grow their side hustles after being laid off.
If you're self-employed, the list of things you can claim on your taxes is long. Really long, Lou emphasizes.
The idea is basically any expenses the self-employed individual incurred to earn that self-employed income is tax deductible," Lou said.
This could be everything from entertainment (meals and drinks while meeting clients), a stationary computer, printer, cellphone bill, internet, transportation, gas, a portion of home office expenses, advertising costs, liability insurance, memberships, even skills training or education.
So whether you're filing your taxes on your own or with a tax partner, Lou recommends that people disclose any and all life changes" over the last year, no matter how seemingly insignificant, as they might really add up.
Ivy Mak is a team editor on the Star's breaking news desk, based in Toronto. Reach her via email: ivymak@thestar.ca