Working remotely: save money by taking full advantage of your tax deductions

Working from home is great, but paying fewer taxes is even better!

If the privileges of working from home and following one’s own schedule used to belong to freelancers only, the pandemic has opened the doors of teleworking to salaried employees. But what about tax deductions for employees who had to convert their homes into offices?   

In addition to the joyful relief of avoiding traffic jams, here’s how to get some extra relief on your tax bill!

The easy method

Seeing the tsunami of demands ahead, the government has put in place a temporary method of calculation to make life easier for everyone. 

For a maximum of 200 days, you can deduct $2 for each day you worked from home. 

Depending on your marginal tax rate, this translates to roughly $200 in tax refunds if you report more than $100,000 (marginal rate of 45% to 53%), or close to $150 if your income is between $49,000 and $85,000 (marginal rate of 37.12%). 

Simple and user-friendly, this approach has the disadvantage of possibly reducing the tax credits to which you’re entitled. 

So this is the method to use if the usual and more complex method requires too much effort for relatively few deductible expenses and a small payoff. 

The Quebec government has made available a very practical online tool to estimate the potential amounts of deductible expenses with the traditional approach. This will allow you to easily choose the method that will allow you to save a maximum amount of tax. 

To access the tool, click here!

The complex method

Here are some expenses that can be subtracted from your income with the classic method. 

Rent, electricity and Internet

Unfortunately for landlords, tenants have the upper hand here because they can deduct part of their rent. 

Of course, it is assumed that you did not use your entire apartment for work, so the online tool allows you to determine how much of your rent is eligible. 

This percentage is then applied to determine the portion of your electricity, heat, water, and Internet expenses that are deductible. 

The Quebec government also adds that under certain conditions “you can claim expenses such as minor repairs, cleaning products, light bulbs or paint. 

Office Supplies

Some expenses for essential work items can be deducted from your income: 

• staples and paper clips;
• ballpoint pens;
• envelopes and postage;
• file folders;
• sticky notes;
• powdered ink;
• ink cartridges;
• other stationery.

The following expenses, however, do not offer any advantage :

• the cost of books, briefcases, and calculators;
• the cost of subscriptions to periodicals;
• the cost of purchasing a computer;
• the cost of purchasing a fax machine;
• the capital cost allowance or the interest on a loan contracted to purchase goods such as computers or faxes.

No one will buy a new car with these tax credits, but it’s still worth it to take advantage of them!

To make real tax savings and optimize your financial planning, contact your advisor at MCB Group.

Don’t forget: March 1, 2021 is the deadline for contributing to your RRSP for the 2020 taxation year.