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Wake Up Sleepy Head, It’s Time to Go to Work
| Guest post by: Brenda Parker |
Article Overview: As an employee there are a number of expenses you may be able to deduct for income tax purposes if you are required to maintain a home office.
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Free Download - Accounting - Beyond the Tax Return By Brenda Parker |
Wake Up Sleepy Head, It’s Time to Go to Work
The alarm goes off and you stumble out of bed. The neighbors are out scraping their car windows in anticipation of their morning commute. You grab your housecoat and coffee, say goodbye to the family and head down the hall to your office and begin your work for the day. Being an employee these days does not always mean that you have to travel away home. With the technology that we have today, this has become an arrangement where employers get to save some costs associated with maintaining a workspace for employees and the employee has another option in regard to where they get the job done.
Employees who are required to maintain a home office, do get some tax relief when tax time rolls around. For example, if you maintain an office in a dwelling which you rent, a portion is deductible if certain conditions are met. Maintaining and covering the expenses of a home office must be required by your contract of employment and the employer should certify this on form T2200. This form does not need to be sent in with your return, but you should keep it on hand in case CRA requests to see it at a later date. The expense must have been paid by you and not reimbursed by your employer, and must be incurred solely for the purpose of earning income from an office or employment.
Subject to the same conditions above, if the premises are owned by you, you may deduct a reasonable portion of expenses related to maintaining the dwelling such as electricity, heating, cleaning and minor repairs. Mortgage interest and capital cost allowance are not deductible. If you are a commission salesperson, you are also allowed to claim a portion of property taxes and insurance. No deduction can be made to cover an imputed "rental value" of the space being used for an office.
Some items used in your home office fall under the heading of "supplies". Again the previously discussed conditions discussed above must be met. These deductible items include the costs of long distance calls, telegrams and cellular phone airtime related to earning employment income. However, the basic monthly service charge for a telephone line or a cellular phone connection are not.
Employees deducting home office expenses are subject to the same restrictions as those who are self-employed. The "work space" in a self contained domestic establishment that you are claiming must meet one of two tests. The work space must either be where you principally perform the duties of your employment (more than 50% of the time) or the work space is used exclusively during the period to which the deductible expenses relate for the purpose of earning employment income and is used on a continuous basis for meeting customers or other persons in the ordinary course of performing the duties of your employment. Note that under the first test, the space does not necessarily have to be used for an office only. It can have other uses as well. The main criteria is that it remains as the place where you principally perform the duties of your employment and you have a T2200 certificate covering it. However, your expenses should be prorated both for square footage and time allocated to the business.
Finally, with the exception of long distance calls, telegrams and cellular phone airtime, expenses claimed for home office expense cannot exceed the employment income earned. Unused office expenses may be carried forward indefinitely to reduce income from that employer in subsequent years.
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Article Tags: anticipation, capital cost allowance, car windows, contract of employment, cra, dwelling, earning income, electricity, heading, housecoat, mortgage interest, nbsp, neighbors, premises, property taxes, regard, salesperson, tax relief, tax time, workspace
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About the Author: Brenda Parker RSS for Brenda's articles - Visit Brenda's website
Brenda Parker operates Scotia Accounting and Tax Services located in Stellarton, NS, Canada. After graduating summa cum laude from St. Mary's University in Halifax with a B Comm in Finance and a BA in Economics, she worked for a national grocery firm in various departments with her last role being assistant manager of Taxation. During this time she attained her Certified General Accountant's designation. Since getting her CGA, she has worked in various management/accounting positions for government ,public accounting firms, and as controller of a regional hotel chain and a new car dealership. She is a Simply Accounting Certified Consultant and Quickbooks partner. In her accounting practice she has served both large and small clients in a wide variety of sectors. From personal taxes to businesses in manufacturing, wholesale, retail and services to charities and not-for-profit organizations. She has clients from Cape Breton Island, NS to Montreal, Quebec to Calgary, Alberta and in many locations in mainland NS. All information in her articles is offered without prejudice and she advises readers to consult a professional accountant in person in regards to their personal situations. Click here to visit Brenda's website   Office Technology Q A Accounting Beyond the Tax Return Moving Expenses Is Your Business Storm Proof Part 1 So who must file an income tax return for a given year |
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