Canadians toiling in their living rooms or basements doing official business or work in 2020 are getting a well-deserved tax break. The Canada Revenue Agency (CRA) has simplified the process to claim the home-from-work tax deduction. You can be eligible and earn a tax relief for up to $400 for the income year 2020.
COVID-19 has forced and continues to push millions of Canadians to work from home. Pandemic fatigue could be catching up after months of being holed up at home for months. Luckily, the effort and sacrifice are worth it when it’s time to file your income tax return.
The CRA’s new tax deduction is an expanded, if not, a simplified version of the work-space-in-the-home expenses rules. You can deduct only part of telework-related expenses in the current tax break, including electricity, heating, and maintenance costs.
This time around in 2020, the CRA will allow employees to work from home to claim modest expenses of up to $400. You don’t need to track detailed costs as before. You’re not required to obtain complete and signed forms by your employer.
To be eligible, you must have worked from home in 2020 due to the COVID-19 pandemic. Also, your employer requires you to work from home. Some employees will make employees choose between the home and office work. In terms of frequency, you work at home must be more than 50% of the time for at least four consecutive weeks in 2020.
The CRA expects the majority of employees to use the flat method when calculating the home office expenses. You can claim a deduction equal to $2 per day for each day you work at home in four consecutive weeks plus each additional day you from home due to COVID-19.
The workdays could be part-time or full-time employment as long as you work at home. Note that days off, vacation days, sick leave days or other leaves of absence don’t count as working days when applying the flat method.
Earning $400 in passive income monthly is possible during the pandemic. The Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) can be your source. Assuming you have $90,250 to spare, the blue-chip stock can deliver a monthly income stream of $400. The fifth-largest bank in Canada pays a 5.33% dividend.
CIBC has been operating since 1867, and started paying dividends one year after. Today, the market capitalization is $48.99 billion. The bank’s resiliency is on full display in 2020. From a COVID-low of $63.58 on March 23, 2020, CIBC rebounded. At present, the year-to-date gain is 8%.
Carissa Lucreziano, Vice-President at CIBC Financial and Investment Advice, said, “Canadians have faced so many challenges this year, it’s understandable they are concerned about the economy in 2021.” She adds that if you don’t know what’s coming next, the best response to have the best buffer for the unexpected. Prepare with a plan and be open to adjusting if necessary.
Applicable for 2020 only
The work-from-home tax deduction is temporary and applies only in the 2020 income year, so don’t forget to claim the tax relief. Next year, more Canadians will be working from home while the vaccination campaign is ongoing. The CRA will probably announce the extension in 2021.
Speaking of the new tax relief for millions of Canadians who are working from home...
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