How to Claim Work-from-Home Tax Credits in Canada

Work-from-home tax deduction in Canada

Canadian taxpayers can still claim a deduction for home-office expenses, although this is different from a tax credit. A tax credit—like those for medical expenses or charitable donations—directly reduces the tax you owe and is often claimed at roughly 15% to 20% of an eligible expense depending on your province or territory. A tax deduction, by contrast, lowers your taxable income. Reducing your taxable income can save you between about 15% and 54% in tax, depending on your income level and where you live.

For the 2023 tax year the simplified flat-rate method that applied during the pandemic (the $2 per day method available in 2020–2022, up to $500 in 2022) is no longer available. Instead, eligible employees must use the detailed method to claim home-office expenses.

What you can claim for working from home in 2023

The Canada Revenue Agency’s detailed method allows eligible employees to claim a proportional share of specific home-office expenses. To qualify under this method an employee must meet these conditions:

• Be required by the employer to work from home
• Work primarily from home—meaning more than 50% of the time
• Have a completed Form T2200, Declaration of Conditions of Employment, completed by the employer

If you meet those criteria, you can claim a pro-rated portion of eligible expenses such as:

• Electricity
• Heat
• Water
• A portion of condominium fees that relates to utilities (electricity, heat and water)
• Home internet access fees
• Routine maintenance and minor repairs
• Rent paid for your home or apartment

To calculate your deduction, determine the portion of your home used as a workspace. This is typically done by dividing the area of your workspace by the total finished living area of your home. Apply that percentage to the eligible expenses to determine the deductible amount. If the workspace is used for both personal and work purposes, or if more than one person uses the space for work, you must further adjust the percentage to reflect actual workspace use.

See the CRA’s guidance for details on qualifying workspaces and how to measure them.

How to claim the work-from-home expense deduction for 2023

Form T2200 is key: some employers may need a reminder that employees who meet the conditions require a completed T2200 for 2023. If you qualify and do not receive the form with your T4, ask your employer for it. Keep copies of your T2200 and all supporting receipts and bills—CRA may request them if it reviews your return.

When calculating your claim, include only the portion of each expense that reasonably relates to your workspace. For example, apply the workspace percentage to your electricity and heating bills, internet fees, and maintenance costs. Renters can include rent; homeowners cannot claim mortgage principal but may claim a portion of mortgage interest only if self-employed (see below).

Special considerations: shared spaces and commissioned employees

If your workspace is a shared area used for both work and personal activities, or is used by more than one person who works from home, you must proportionately reduce the claimable percentage to reflect actual work use. The CRA provides examples and worksheets to help determine the appropriate allocation for shared spaces.

Commissioned employees—those paid partly or fully by commission—may qualify to claim additional employment expenses. Along with the standard home-office items, commissioned employees may be able to claim:

• Home insurance
• Property taxes
• Leases for equipment such as a cell phone, computer, laptop or tablet when that equipment is reasonably required to earn commission income

Self-employed home-office tax deduction

Self-employed individuals can also claim home-office expenses, and the rules differ slightly. Self-employed taxpayers may include mortgage interest as an eligible expense in addition to the items salaried employees can claim. However, home-office expenses for a self-employed business cannot be used to create or increase a business loss for tax purposes; they can only reduce net business income to zero. Any excess home-office expenses cannot be deducted against other sources of income immediately, though they can be carried forward and applied against net rental income in future years where permitted.

Documentation is important for both employees and self-employed taxpayers. Keep detailed records of expenses, bills, and a clear method for how you calculated the workspace percentage in case CRA asks for evidence.

In summary, if you are permanently working from home and you meet the CRA’s eligibility rules—primarily working more than 50% of the time from home and having a completed T2200—you can claim home-office expenses on your 2023 tax return using the detailed method. It takes a bit more documentation than the temporary flat-rate approach used during the pandemic, but the deduction you recover may be larger and could reduce your tax payable more significantly.

Read more about filing your taxes:

• Can you file multiple years of income taxes together in Canada?
• Self-employed? Here’s how to file taxes for a side hustle
• How to fill out a personal income tax return for 2023
• How to file your taxes online in Canada