Liberals Announce $400 Home Office Expense Income Tax Deduction

OTTAWA — Recognizing that the pandemic has forced millions of people to work from home, the Liberal government announced a new personal income tax deduction for Canadians who have found themselves in that very situation.

Canadians will be able to deduct $400 under a simplified “Home Office Expense Deduction” on their 2020 income tax return, according to the federal government’s new fall economic statement released Monday.

“[Canada Revenue Agency] will allow employees working from home in 2020 due to COVID-19 with modest expenses to claim up to $400, based on the amount of time working from home, without the need to track detailed expenses, and will generally not request that people provide a signed form from their employers,” the statement said.

The new deduction expands the current limited “work-space-in-the-home expenses ” rules that allow workers to deduct only part of their telework-related expenses, including electricity, heating, and maintenance costs.

Additional details about how Canadians will be able to claim the new COVID-19-related deduction are expected to be announced in “coming weeks” by the Canada Revenue Agency.

Finance Minister Chrystia Freeland tabled the much-anticipated mini-budget in the House of Commons Monday and said the government will “do whatever it takes to help Canadians stay healthy, safe and solvent.” 

Promising to invest in “every necessary and helpful public health measure,” Freeland pledged that the federal government “will support Canadian families and Canadian businesses, in a deliberate, prudent and effective way.”

That prudence has a sticker price. The total cost in direction measures “to fight the virus and help people” has reached $322 billion so far, she said, plus an additional $85 billion in tax and duty deferrals.

“This is the largest economic relief package for our country since the Second World War.” 

In September, the parliamentary budget officer released a report projecting the deficit for this current fiscal year to hit the $328.5-billion mark . 

Monday’s update projects the deficit has increased to $381.6 billion.

Watch: Freeland says pandemic needs to be crushed before real economic recovery begins. Story continues below video.

Despite the fall economic statement’s stress that this level of “extraordinary spending” is time-limited, Freeland said when the COVID-19 virus is under control, additional investments will be made to boost Canada’s post-pandemic economy. 

The government plans to launch a three-year stimulus plan to spend three-to-four per cent of the Gross Domestic Product on programs and measures to “jumpstart our recovery.” Freeland estimates the cost of this stimulus package to be between $70 billion and $100 billion.

“Our stimulus will be designed, first and foremost, to provide the fiscal support the Canadian economy needs to operate at its full capacity and to stop COVID-19 from doing long-term damage to our economic potential.”

This is Freeland’s inaugural fiscal update, following the August resignation of her predecessor, Bill Morneau , during the government’s WE Charity controversy .

Businesses expect some workers to continue to work remotely 

Since the onset of the pandemic in March, workers who are able to do their jobs from home have been encouraged to do so to reduce the risk of COVID-19 transmission among employees in shared office spaces.

Statistics Canada found as many as 39.1 per cent of workers were teleworking at the end of March after physical-distancing measures came into effect during the pandemic’s first wave.

But the opportunity to work from home isn’t one that has been equally felt across industries. 

Eighty-five per cent of people with jobs in finance, insurance, and educational services were mostly likely to be able to do their jobs at home, according to StatCan. 

It’s a stark comparison to the six per cent of workers in accommodations and food services; and four per cent of people working in forestry, fishing, and hunting who have telework capacity.

There’s also an education divide, too. 

Statistics Canada found that workers younger than 25 and those who have less than a high school diploma have the lowest telework opportunities, “since these characteristics are often associated with minimum-wage and low-income workers.”

The pandemic has reshaped how millions of Canadians work, and StatCan survey results suggest increased remote working is likely here to stay. 

In February, before the physical-distancing measures were adopted across the country, 16.6 per cent of of businesses reported that 10 per cent of their employees worked remotely. 

By the end of May, that figure had doubled: nearly one-third of businesses reported 10 per cent of the employees were working from home.

Statistics Canada estimates 22.5 per cent of businesses will continue to have at least 10 per cent of their employees working remotely after the pandemic is over.