Canadians working in their living room or basement to do business or formally work in 2020 get a well-deserved tax break. The Canada Revenue Agency (CRA) has simplified the process for claiming the home-to-work tax deduction. You may qualify and receive tax relief of up to $ 400 for the 2020 income year.
COVID-19 has forced and continues to push millions of Canadians to work from home. Pandemic fatigue could catch up after months of staying home for months. Fortunately, the effort and sacrifice is well worth it when it comes time to file your tax return.
The CRA’s new tax deduction is an expanded, if not simplified, version of the home workspace fee rules. You can only deduct a portion of telecommuting expenses in the current tax break, including electricity, heating and maintenance costs.
This time around in 2020, the CRA will allow employees to work from home to claim modest expenses of up to $ 400. You don’t need to track detailed costs like before. You are not required to obtain complete forms signed by your employer.
To be eligible, you must have worked from home in 2020 due to the COVID-19 pandemic. In addition, your employer requires you to work from home. Some employees will choose between working from home and working in the office. In terms of frequency, you work from home should be more than 50% of the time for at least four consecutive weeks in 2020.
The CRA expects the majority of employees to use the lump sum method to calculate home office expenses. You can claim a deduction equal to $ 2 per day for each day you work from home for four consecutive weeks, plus each additional day from your home due to COVID-19.
Workdays can be a part time or full time job as long as you work from home. Note that days off, vacation days, sick days or other holidays do not count as working days when applying the flat rate method.
Earning $ 400 in passive income per month is possible during the pandemic. the Canadian Imperial Bank of Commerce (TSX: CM) (NYSE: CM) may be your source. Assuming you have $ 90,250 to sell, the prime stock can generate a monthly income of $ 400. The fifth largest bank in Canada pays a dividend of 5.33%.
CIBC has been in business since 1867 and began paying dividends a year later. Today, the market capitalization is $ 48.99 billion. The bank’s resilience is fully displayed in 2020. From a COVID-low of $ 63.58 on March 23, 2020, CIBC has rebounded. Currently, the gain since the start of the year is 8%.
Carissa Lucreziano, Vice President of CIBC Financial and Investment Advice, said: “Canadians have faced so many challenges this year that it is understandable that they are concerned about the economy in 2021.” She adds that if you don’t know what’s coming next, the best answer is to have the best buffer for the unexpected. Prepare with a plan and be open to adjustments if necessary.
Applicable only for 2020
The homework tax deduction is temporary and only applies in income year 2020, so be sure to apply for the tax break. Next year, more Canadians will be working from home during the vaccination campaign. The CRA will likely announce the extension in 2021.
Foolish contributor Christopher Liew has no position in any of the stocks mentioned.