CRA $400 Work From Home Credit: Do You Qualify?

The home office expense deduction is a valuable tax break for Canadians working from home. You can complement this new CRA offer with investment income from the Enbridge stock, a top-tier, buy-and-hold asset.

| More on:

Since August 2020, about 6.8 million Canadians have been working from home. According to Statistics Canada, the figure represents 40% of the country’s workforce. Also, 73% of these home-based workers think the trend will continue well into the post-pandemic era.

The federal government expects home office expenses to increase following the transition to the new setup. Now, Canadians can claim a home office expense deduction from the Canada Revenue Agency (CRA). If you’re in the same situation or your employer requires you to work from home, you can claim up to $400 in tax credits ($2 per day).

The CRA anticipates a deluge of the new home office expense claims. Most workers or employees don’t want the hassle of red tape when claiming the credit, so the tax agency addressed this concern. There are two options available to taxpayers – flat rate and detailed methods – for the income year 2020.

Flat rate

For the flat rate method, the CRA simplified the process and relaxed the rules. An individual claimant must meet the following conditions to qualify for a 2020 deduction:

  • Worked from home last year due to the COVID-19 pandemic
  • The work must be 50% of the time for at least four consecutive weeks
  • Claim is only for home office expenses and no other employment expenses
  • The employer will not fully reimburse the employees for all home office expenses

This flat rate method’s advantage is that employees no longer need to obtain a signed Form T2200 or T2200S from their employers. However, it would be best to document how many days you worked at home.

Detailed method

Taxpayers who want to claim larger or employer portion of actual home office expenses can use the detailed method. The rules are similar for the flat rate approach, although employees must submit to the CRA a duly signed T2200 or T2200S form from their employers. Also, there’s a determination of the size and use of the space at home.

Investment opportunity

Regarding earning potentials, income investors are staying calm and investing in the stock market. During the pandemic-induced crash in March 2020, the Toronto Stock Exchange sunk to a low of 11,228.50. However, on February 12, 2021, Canada’s primary stock market index finished at a record-high 18,460.20 or 64.4% higher than its COVID-low.

Right now, there’s an opportunity to build your investment portfolio through one classic dividend stock. You can purchase shares of Enbridge (TSX:ENB)(NYSE:ENB) and hold the energy stock for good. The current dividend yield is a hefty 7.5%. Regardless of the amount, your capital will double in 9.6 years.

The top-tier energy stock lost 15.3% last year, but management did not slash dividends to preserve the balance sheet. Enbridge’s business model is low risk and generates highly resilient and long-lived cash flows. The 26 consecutive years of dividend growth (10% CAGR) prove the asset’s ability to deliver superior shareholder value.

Valuable tax break

The CRA’s new home office expense deduction is limited but very helpful. Canadians working from home have a substitute for actual home office expenses. Furthermore, the process is simple and hassle-free.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge.

More on Dividend Stocks

profit rises over time
Dividend Stocks

These 2 Dow Stocks Are Set to Soar in 2025 and Beyond

Two Dow Jones stocks are screaming buys but Canadians must hold them in an RRSP or RRIF to avoid paying…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Use Your TFSA to Earn Ultimate Passive Income

If you have a TFSA, then you have the key to creating ultimate passive income. All you need is a…

Read more »

Confused person shrugging
Dividend Stocks

Better Buy: Fortis Stock or Hydro One Stock?

Let's do a compare and contrast of these two top utilities stocks right now, shall we?

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

Boost Your Passive Income: 2 Canadian High-Yielders at a Bargain

Nutrien (TSX:NTR) stock and another play that appear like fantastic dividend bargains in mid-November.

Read more »

3 colorful arrows racing straight up on a black background.
Dividend Stocks

TSX Stocks Soaring Higher With No Signs of Slowing

Three TSX stocks continue to beat the market and could soar higher in an improving investment landscape.

Read more »

Hourglass and stock price chart
Dividend Stocks

Goeasy Stock: Is It Heading for a 52-Week High?

Goeasy stock has been edging higher, especially after another record-setting earnings report. So are 52-week highs in sight?

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

Here’s the Average TFSA Balance at Age 44 in Canada

You can invest your TFSA in funds like the BMO Canadian High Yield Dividend ETF (TSX:ZDV) to grow the balance.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

The Best Telecom Stock to Buy Before 2025

Choosing the safest stock from a decimated sector can be tricky, but if there is a reasonable chance of full…

Read more »