Can the cost of a home office be deducted from my tax return?

The global COVID-19 pandemic has resulted in a fair amount of us being confined to our homes for the better part of this year. Although the situation seems to be improving in many places, it doesn’t seem as if we will be returning to (pre-COVID) normal anytime soon. With most of us now working from home on a daily basis, we’re starting to have to cover all the costs that would usually be paid for by our workplace. This can seem like an unfair burden – companies get to save money on office supplies as the cost for computers, printers, and stationary get shifted onto individual employees. Naturally, employees are looking for ways to lessen the financial blow of working from home. A common question we have heard is “Can the money I spend on my home office setup be tax deductible?”

The answer is not clear cut. Because financial jargon can be confusing, we’ve summarized the basics of the tax reduction scheme into something more manageable.

First, the situation is different for self-employed people and those employed by a company.  If you are a freelancer it is a lot more straightforward, you can automatically get a deduction on all the money you spend on your home office, no complications involved.

For employees at a company there are a lot more hoops to jump through. In order to qualify for a tax reduction, you have to a) have a specific area in your house dedicated to your employment (working from your bedroom doesn’t count) b) spend over half your work hours in this home office. Once you have these features set up, Finally, in order to be eligible for tax deductions, your home office has to have everything specifically needed for you to do your job, and it can’t be used for anything else. This means no printing out your morning crossword puzzles and no using your new laptop to check up on the news.

Now, once you’ve cleared out the spare bedroom, moved in all your equipment, and set up an adequate home office, how do you calculate how your expenses will be deducted? This depends on how you earn your income and separates employees into two groups: people who work on commission, and people with a set salary. You are counted in the first group if you earn over half your remuneration by working on commission.

Tax offices will often request invoices, statements, and calculations of expenses, and if these are not all found to be in order, your tax deduction will be rejected altogether. For freelancers and salaried employees alike, it is important to keep an excellent track of your finances, and to ensure that there are no mistakes or inconsistencies.

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