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Did You Work From Home in 2020? You Can Get a $400 CRA Tax Break

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We are nearing the end of 2020 — and what a year it’s been. Millions of people lost their jobs due to the pandemic. Many of us were still able to work from home during the lockdown measures and keep generating income. The work-from-home culture has become a predominant way many professionals have been operating for the past several months.

Working from home comes with major perks. You do not have to spend money and time commuting to and from work. It means you can stay warm and cozy indoors for longer. However, many people might have had expenses that came with adopting a WFH routine.

You might have been spending more on electricity or the internet. You might have even had to spend some money on adjusting the workspace in your home to turn it into a makeshift office for your work. The Canada Revenue Agency (CRA) is offering an incentive to Canadians working from home through a tax rebate.

CRA work-from-home tax credit

The CRA has rolled out several tax benefits and emergency payments amid the pandemic to help Canadians ease their financial burden. Apart from the Canada Emergency Response Benefit (CERB) and its alternatives, the CRA recently introduced the $400 work-from-home tax credit.

If you have been working from home during the pandemic, there is a chance you are eligible for the $400 deduction in your taxable income for the 2020 income year. The work from home tax credit has been available for professionals working remotely before the pandemic. Self-employed individuals could also leverage the tax credit for work-related expenses.

The CRA has been more lenient this year with the rules for the tax credit and increased the rebate amount to $400.

Eligibility criteria for $400 tax break

Not everybody working from home during the pandemic can benefit from the tax rebate. Here is a look at the eligibility criteria that you need to fulfill so you can qualify for the tax credit:

  • You worked from home in 2020 due to the COVID-19 pandemic.
  • You worked more than 50% of the time from home for at least four consecutive weeks in 2020.
  • You are only claiming home office expenses and not any other employment expenses.
  • Your employer did not reimburse you for all your home office expenses.

How to use your tax savings

In times like these, any money you can save has immense value. If you qualify for and claim the $400 tax credit, you can use your tax savings to boost your investment capital. While $400 might seem like an insignificant amount on its own, investing it in the right stock could make it worth much more.

Consider investing the $400 in a stock like Well Health Technologies (TSX:WELL) and storing the shares in your Tax-Free Savings Account (TFSA). Well Health is an industry leader among telehealth and medical data providers. The company has significant room to expand in the growing industry, and it can result in massive returns on your $400 in the company.

Well Health recently entered the U.S. market and made several key acquisitions this year. The company might be able to roll out more medical software, telehealth, and online services in the coming years.

The billion-dollar company is operating in an industry worth trillions of dollars. With plenty of market share to grab, Well Health is one of the fastest-rising healthcare stocks on the TSX right now.

Foolish takeaway

The pandemic has made Canadians realize the importance of putting their savings to good use. Holding your cash under the mattress will no longer cut it. It is better to invest your savings in income-generating assets like Well Health.

WELL has a massive year-to-date gain of almost 410% at writing. Trading for $7.84 per share at writing, the barrier to entry is still low, and there is plenty of potential growth for investors.

Buying and holding the stock in your Tax-Free Savings Account (TFSA) can allow you to see immense returns on your investments that you can reap tax-free.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned.

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