Home Office Tax Return: Claiming Maintenance

If you've been working from home, you may be able to claim tax deductions for expenses relating to your home office. This includes employees and self-employed workers, but there are different rules for each. For employees, you'll need to meet certain eligibility criteria and get a completed and signed form from your employer. You can then claim a portion of expenses related to your home office, such as utilities, maintenance, and rent. Self-employed workers can also deduct a reasonable portion of their home office expenses, based on the size of their workspace relative to their home. This can include mortgage interest, utilities, and repairs.

What is the detailed method for claiming home office maintenance?

The process for claiming home office maintenance depends on whether you are self-employed or an employee, and the country in which you reside. In the United States, for example, employees are not eligible to claim the home office deduction. However, in Canada, employees can claim certain expenses related to their home office.

For US taxpayers, the home office deduction is available to both homeowners and renters. It allows taxpayers to deduct certain home expenses when they file their taxes. To be eligible, the home must be used exclusively and regularly as the primary place of business. Expenses that can be deducted include mortgage interest, insurance, utilities, repairs, maintenance, depreciation, and rent.

There are two methods for calculating the home office expense deduction: the simplified option and the regular method. The simplified option has a rate of $5 per square foot for business use of the home, with a maximum deduction of $1,500. The regular method involves calculating the percentage of the home devoted to business use and deducting indirect expenses accordingly. Direct expenses are deducted in full.

In Canada, there are two methods for claiming home office expenses: the temporary flat-rate method and the detailed method. The temporary flat-rate method allows you to claim a set amount per day worked from home due to the COVID-19 pandemic, up to a maximum of $500 per individual in 2021 and 2022. This method does not require any receipts or documentation.

The detailed method, on the other hand, requires you to tally up all the expenses incurred, including utilities, home internet, rent, maintenance, and minor repair costs. You must have receipts and backup documentation for each claim. For utilities, rent, and other expenses, you need to allocate the expenses based on the percentage of the home used for employment purposes. This is typically calculated by dividing the workspace area by the home's total finished area.

To claim home office expenses in Canada, you will need to fill out specific forms, such as Form T777 or Form T777S, and in some cases, Form T2200 or Form T2200S. These forms must be completed and signed by your employer.

What is the temporary flat rate method for claiming home office maintenance?

The temporary flat rate method is a simplified way to claim home office expenses for employees in Canada who worked from home in 2020, 2021, or 2022 due to the COVID-19 pandemic. This method allows employees to claim $2 for each day they worked from home during that period, up to a maximum of $400 per individual in 2020 and $500 per individual in 2021 and 2022. This equates to a maximum of 200 working days in 2020 and 250 working days in 2021 and 2022.

To be eligible for the temporary flat rate method, employees must meet all of the following conditions:

• They worked from home in 2020, 2021, or 2022 due to the COVID-19 pandemic, even if they chose to work from home.
• They worked more than 50% of the time from home for a period of at least four consecutive weeks in the year.
• They are only claiming home office expenses and are not claiming any other employment expenses on line 22900.
• Their employer did not reimburse them for all of their home office expenses.

Using this method, employees can claim home office expenses such as rent, electricity, home internet access fees, office supplies, and cell phone minutes. However, they cannot claim any other employment expenses on line 22900, such as motor vehicle expenses. Additionally, they are not required to keep documents to support their claim, and their employer is not required to complete and sign Form T2200.

What home repairs are tax-deductible?

If your home serves purely as a personal residence, you cannot deduct the costs of repairs. However, if you qualify for the home office tax deduction, you can deduct the costs of some repairs.

The home office deduction allows you to deduct expenses directly related to maintaining your home office, as well as a portion of certain expenses associated with your home that are not deductible by the average homeowner. These expenses include insurance, utilities, repairs, security system expenses, maid service, garbage disposal, and decorating expenses.

To qualify for the home office deduction, you must have a legitimate business and use part of your home exclusively and regularly for that business. The home office must be used solely for business purposes; if it is also used as a residence, even occasionally, it does not qualify. Additionally, your home office must be the principal place of business, meaning it is where you regularly and full-time engage in business activities such as managing your business, meeting clients, dealing with finances, conducting research, or performing other business duties.

When determining whether a repair is tax-deductible, it is important to distinguish between a repair and an improvement. A repair is an activity that keeps your home in good condition but does not make it substantially better than it was before. Examples of repairs include patching a leaky roof, repainting your home, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows. On the other hand, an improvement makes the property substantially more valuable, prolongs its useful life, or adapts it to a new use. Examples of improvements include installing a new roof, adding a deck, installing a new heating system, or installing a new foundation.

Repairs that are made exclusively to your home office are considered "direct" expenses and are fully deductible. Repairs that benefit your entire home are considered "indirect" expenses and are deductible according to the percentage of home office use. For example, if you use 20% of your home as an office, you can deduct 20% of the cost of repairing your home heating and air conditioning system.

In addition to repairs, home improvements that are made to your home office are also tax-deductible, but they must be depreciated over time. This means that you can deduct a portion of the cost each year, rather than deducting the entire amount in a single year.

How do you calculate the size of your home office?

To calculate the size of your home office for tax deduction purposes, you need to work out the percentage of your home that is used exclusively for business.

Firstly, measure the length and width of your home office space to determine the area in square feet or square metres. If you have a dedicated room for your home office, this is simply a case of multiplying the length by the width. If only a portion of the space is dedicated to your home office, estimate the area of this space.

Next, calculate the square footage or square metreage of your home. This information should be available in legal documents from when you purchased or rented your property, or from your local county office or website.

Finally, divide the size of your work space by the size of your home and multiply this figure by 100 to get the percentage of your home that is used as a workspace.

For example, if your home office measures 100 square feet and your home measures 1,500 square feet, then (100/1500) x 100 = 6.67%. This means 6.67% of your house is used for your business.

What are the eligibility criteria for claiming home office maintenance?

To be eligible to claim home office maintenance on your tax return, you must meet all of the following conditions:

• Your employer required you to work from home. This requirement does not have to be part of your employment contract, but it should be a written or verbal agreement. For 2023, if an employee has voluntarily entered into a formal telework arrangement with their employer, they are considered to have been required to work from home. Alternatively, you can claim that you worked from home in 2020, 2021, or 2022 due to the COVID-19 pandemic.
• You were required to pay for expenses related to the workspace in your home.
• Your home workspace is where you mainly (more than 50% of the time) work for a period of at least four consecutive weeks in the year. The period can be longer than a month. If you have more than one eligible period during the year, you can claim your expenses for each period.
• Your home workspace is only used to earn employment income. You also have to use it regularly and continually for in-person meetings with clients, customers, or other people while doing your work.
• Your expenses are used directly in your work.
• You have a completed and signed copy of Form T2200, Declaration of Conditions of Employment, or Form T2200S, Declaration of Conditions of Employment for Working at Home Due to COVID-19, from your employer.

Note that you cannot claim any expenses that were or will be reimbursed by your employer.

Frequently asked questions