For individual Canadians, one of the few positive aspects of the recent pandemic was the opportunity it provided to work from home – first as a mandated public health necessity and later as a choice provided by employers. For most employees, working from home was a welcome option which provided better work-life balance and a break from the cost and aggravation of the daily commute. In addition, having a work-from-home arrangement allowed employees to claim a tax deduction for costs (like home heating and other utilities costs, internet access, etc.) which they would have had to incur in any event. For most employees, working from home was a win-win situation.
Unfortunately for such employees, more and more employers, including major corporations and federal and provincial governments, are starting to mandate a return to the office. The extent of the return to the office varies by employer: sometimes that means a requirement to work from the employer’s workplace two, three, or four days a week, while other employers have mandated an end to all work-from-home arrangements and are requiring employees to be in the office five days a week.
Aside from the logistical arrangements which must be made where a work-from-home arrangement is ended, employees will be wondering what that return to the office will mean for any tax deduction claims which can be made for home office expenses on the return for the 2025 tax year and in subsequent tax years
Employees who work from home have always been able to claim a tax deduction for costs related to a home office and those rules, outlined below, remain in place for 2025.
In order to claim a deduction for costs related to a work-from-home space the employee must first have been required by their employer to work from home. Such requirement does not have to be part of the employee’s employment contract, but can be a written or verbal agreement. An employee who voluntarily enters into a formal telework agreement with their employer is considered to have been required to work from home.
As well, the employee must have been required to pay (without reimbursement) the costs related to that work-from-home arrangement.
In addition, at least one of the following criteria must also be satisfied in order for an employee to claim work-from-home costs.
- The work-at-home space is where the employee mainly (more than 50% of the time) did their work for a period of at least four consecutive weeks during the year; or
- The employee uses the workspace only to earn their employment income. They must also use it on a regular and continuous basis for in-person meetings with clients, customers, or other people in the course of their employment duties.
In most cases, it would be unlikely that an employee would hold in-person client or customer meetings in their own home rather than at the employer’s place of business, meaning that the vast majority of employees who can claim work from home expenses qualify to do so by meeting the “50% of time working from home for four consecutive weeks” criteria.
Once these threshold criteria are met, a broad range of costs become deductible by the employee. Specifically, a salaried employee can claim and deduct the part of specified costs that relate to their work from home space, such as rent; utilities costs like electricity, heating, and water (or the portion of a condo fee attributable to such utilities costs); home maintenance and minor repair costs; and internet access (but not internet connection) fees.
Once total expenses are tallied, the taxpayer must determine the percentage of those expenses which can be deducted as home office expenses; the CRA provides detailed information on its website of how such determination is made. Generally, the employee determines that percentage based on the square footage of the workspace as a percentage of the overall square footage of the home. Detailed information on how to make those calculations, whether for a dedicated or shared home office work space (including an online calculator) can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-22900-other-employment-expenses/work-space-home-expenses/calculate-expenses.html. In all cases, the Canada Revenue Agency can ask the taxpayer to provide documentation and support for claims made using the detailed method.
There is one further requirement for employees who seek to deduct costs incurred in relation to a home office using the detailed method. Each such employee must obtain a T2200 Declaration of Conditions of Employment – Canada.ca. On that form, the employer must certify the work-from-home arrangement and confirm that the employee is required to pay their own home office expenses and is not being reimbursed for any such expenses incurred. Where there is any kind of reimbursement provided, the employer must specify the type of expense reimbursed, and the amount of reimbursement. And, of course, the employee cannot claim a deduction for any expenses for which reimbursement was received.
For employees who are now returning to the office for some, but not all, days of the week, the continuing availability of home office expense claims will likely depend on how that return to the office is structured. Specifically, for most employees, the continuing availability of a deduction for home expenses will be determined by whether they can continue to meet the threshold requirement of working from home “50% of the time for four consecutive weeks”.
The range of work-from-home arrangements is almost limitless, but the rules which will apply with respect to the most common kinds of arrangements which might be agreed to by employer and employee during the 2025 and subsequent tax years are listed below.
- A full-time employee who has worked from home three days a week during 2025 and is continuing to do so will be eligible to claim home office expenses. The same employee who works from home two days a week during 2025 will not be eligible to claim any deduction, as the requirement of working from home more than 50% of the time has not been met.
- A full-time employee who worked from home three, four, or five days a week during all of 2025 but is required to return to the office full-time beginning in November 2025 will be entitled to claim home office expenses for the January to October 2025 period only.
- A full-time employee who alternates between working from home full-time for a week, with the following week spent in the office full-time will not be eligible to claim home office expenses, as the requirement of working from home more than 50% of the time has not been met.
- A full-time employee who works from home three days a week during only the months of July and August may claim home office expenses, but only for such expenses incurred during those two months.
It’s readily apparent that, even where the number of work-from-home days are the same, the way in which a part-time work-from-home arrangement is structured can determine whether or not the employee can claim a deduction for home office expenses. Employees who are subject to a return-to-office requirement but who are able to negotiate some work-at-home time with their employer will need to carefully consider how to structure that work-from-home arrangement, in order to meet the CRA’s requirements and thereby preserve the ability to claim a tax deduction for work-from-home costs.
Detailed information on the deduction of employee work-from-home costs, including a number of examples of work arrangements which do or do not qualify for a tax deduction claim, can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-22900-other-employment-expenses/work-space-home-expenses.html.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
