The Canada Revenue Agency (CRA) has made it easier to deduct home workplace expenses. If you work from home, you can claim a new, simplified tax deduction for home office costs.
Canadians who worked from home could always deduct home office expenses. But until recently, the process of claiming these deductions was complicated. Involving several different tax deductions for different expenses, it wasn’t something you’d want to tackle without an accountant.
Now you can just claim a straightforward $2 break for every day you worked from home, up to a total of $400. In this article I’ll be exploring how you can qualify for this tax break, and how much you can save.
How to qualify for the tax break You qualify for the Work From Home tax deduction if you work from home and have eligible expenses. You can determine whether your expenses are eligible by looking at the CRA’s expense list. Some examples of eligible expenses are rent, utilities and repair costs. The expenses must be incurred in spaces that you work in. You can claim $2 a day for every day you work from home. There is a $400 cap on the deduction.
How much you could save The amount of money you save with a $400 deduction depends on your income level.
Unlike a tax credit, which reduces tax paid on income, a deduction works by slashing dollars off your reported income. So the actual tax savings depend on how much tax you’d pay on an extra dollar of income.
If your marginal tax rate is 33%, you’ll save $132.
If your marginal tax rate is 50%, you’ll save $200.
Both of these examples, of course, assume that you can claim the full $400. If you can only claim, say, $200, then the savings will be half of the amounts above.
A fascinating Canadian company leading the work from home revolution Working from home has big implications for Canadian taxpayers. It also has big implications for Canadian companies. Work from home lets companies save money on office space. So it’s no surprise that big companies are opting to let more and more employees take their work home.
One Canadian company is even helping other companies do so.
Docebo Inc (TSX:DCBO) is a Canadian tech company that makes training easier than ever before. It develops e-learning software that lets companies develop online training modules. In the COVID-19 era, training can’t always be done in the office. Companies like Docebo are helping to take it remote.
And DCBO is already finding success in this niche. In its most recent quarter, it grew revenue by 52%, had $15 million in subscription revenue, and did $0.6 million in positive adjusted EBITDA. In the first quarter, it also had positive GAAP earnings–specifically $0.7 million worth.
For a company to be inching this close to profitability just a year out from its IPO is extremely encouraging. And DCBO should continue to grow as the work from home trend accelerates.
Between companies like DCBO soaring in the markets and the CRA bringing in new tax breaks, the message is clear: work from home is here to stay.
The post Grab the CRA’s New $400 Work From Home Tax Break appeared first on The Motley Fool Canada.
Fool contributor Andrew Button has no position in any of the stocks mentioned.
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