Home Workspace “Simplification” Costs: $260 Million

Evelyn Jacks

It appears that $2 a day adds up to millions of dollars in tax costs for the government.  The Parliamentary Budget Officer (PBO) released the costs of the new simplified home workspace expenses on February 4, now estimated at $260 million. The costing provides some interesting insight on expense filing by employees.

Based on 2018 data, the number of people who declared home workspace expense were about 10% of individuals who worked from home and their average deduction was $1550. 

Despite the significant number of people who were required to work from home in 2020 (estimated at 39% in March 22, 2020), it is anticipated the actual claims for qualifying deductions will be much less as many of these individuals may not have had a dedicated home workspace set aside.  They will be required to prorate certain costs by the amount of time spent in a common area workspace, if they use a detailed method. Learn more here: “Tip Sheet: New Criteria for Employees Claiming Home Office Expenses”

On the other side of the analysis is the fact that previous to the pandemic, people who did not claim home workspace expenses likely did not qualify. Now with the flat $2 a day unreceipted temporary rate, capped at a maximum of $400 for the year, more people will qualify to make the claim. 

However, the PBO also states that they anticipate that individuals who rent will be more likely to file under the detailed method; particularly if their rent is over $1,000 a month. 

The interesting counterpoint to this deduction is the fact that working from home has actually not cost the taxpayer more in many cases.  In fact, many have saved money that would have spent on transportation, meals, clothing and food associated with working out of the home. 

Finally, the additional costs of auditing employees who make these claims may be astronomical, considering the extra tax preparation and audit defence fees that may be required.  It likely would have been simpler and less costly for taxpayers if the government had simply increased the existing Canada Employment Credit, currently a maximum of $1,245.     

What’s your take?  Was the simplification of home workspace claims to include home workspace costs for 2020 a good idea?

Additional Educational Resources – prepare for tax season while there’s still time with the Advanced Personal Tax Course for filing 2020 returns.