As early as March 2020, millions of Canadians who don’t usually do remote work are converting spaces in the home as work stations. Working from home has become necessary to prevent catching the coronavirus. According to Statistics Canada, the number has swelled to 6.8 million people or 40% of the country’s total workforce.
Also, a survey for Research Co. reveals that 65% would like to work more often at home in post-pandemic. About 73% of the poll respondents think the home trend will continue and could become permanent. If you’re part of the at-home workers this year, the Canada Revenue Agency (CRA) has a new tax break for you.
Work-from-home tax deduction
Employees can now claim up to $400 of home office expenses when they file tax returns in 2021. The work-at-home tax deduction is available during COVID-19 or for the income year 2020 only. To make sure many can claim the tax deduction, the CRA simplified the claiming process.
Temporary flat-rate method
Eligible employees can use the temporary flat-rate method to claim home office expenses as deductions on their income tax returns. You must have worked from home for more than 50% of the time over at least four consecutive weeks this year due to the 2020 health crisis.
The new method allows you to claim a $2 deduction for each day worked at home, up to a maximum of $400. You don’t need to obtain a completed and signed Form T2200 or Form T2200S from your employer.
Detailed method for larger claims
For a more considerable amount of home office expenses, employees can use the existing detailed calculation method. Under the process, secure the new simplified forms, T2200S and T777S, for your employer to sign. The CRA launched a calculator to assist in the computation of expenses.
If you’re investing in stocks next year and starting to fill out your shopping list, a household name like Manulife Financial (TSX:MFC)(NYSE:MFC) is right on the money despite a rough year. The insurance stock is down 9% year to date, but analysts predict a 19% rebound in the next 12 months.
Manulife is a great income provider to dividend investors. Note that the stock has earned the dividend aristocrat status for its dividend growth streak of six years. Likewise, it boasts of a five-year annual dividend growth rate of 12%. The current share price is $22.60, while the dividend yield is a hefty 4.99%.
The $43.84 billion global insurer is well capitalized and likely to maintain the dividend yield amid the pressure to preserve liquidity. The payouts should be sustainable, given the low payout ratio of 41%. With the expected normalization of economies with the rollout of COVID-19 vaccines, Manulife can recover lost ground.
An extension is highly possible
The CRA hasn’t announced the extension of the work-from-home tax deduction in 2020. However, it expects millions of Canadians to continue working from home until there’s full containment of the COVID-19 pandemic. Taxpayers should welcome the tax relief for now while doing remote work.
Hence, don’t miss to claim the deduction if you’re eligible. Your tax payables could reduce substantially in the coming tax season.
Speaking of the new CRA $400 tax relief for Canadians working at home...
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