6 October 1998 External T.I. 9822135 - DEDUCTIONS FOR IN-HOME EXPENSES

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Are deductions for in-home expenses allowed if the employee has a choice to work at home or at the employer’s office.

Position: No deduction allowed unless employer requires employee to work at home

Reasons: 8(1)(iii) and IT352R2

XXXXXXXXXX 982213
C. Tremblay
October 6, 1998

Dear Sir;

Re: Deductions for In-Home Expenses

This is in reply to your letter of August 10, 1998, wherein you seek some clarification on reading IT-352R2, Employee’s Expenses, Including Work Space in Home Expenses, as to whether or not the deductibility for work space in home expenses is affected if it is your choice to work at home. You are a non-commissioned employee. Also, you specifically asked about deducting a portion of your house insurance. Further, provided you perform the majority of your work (more than 50%) at the dedicated workspace in your home, and are otherwise entitled to deduct work space in home expenses, you asked whether you need to relinquish your work space at your employer’s office.

Our Comments:

A deduction for office space in the home expenses is made under subparagraphs 8(1)(i)(ii) and (iii). Generally, an employee in computing income for a taxation year, is allowed to deduct amounts paid for office rent, supplies and salary to an assistant or substitute. Subject to certification by the employer, these expenses are deductible provided the employee is required by contract of employment to supply and pay them.

Subsection 8(13) of the Act prohibits the deduction of office in the home expenses, unless the individual either principally performs the duties of the office or employment in the work space, or the work space is “used exclusively ... for the purpose of earning income from the office or employment and used on a regular and continuous basis for meeting customers or other persons in the ordinary course of performing the duties...” In your enquiry, you note that a choice can be made by the employee as to either work at home or at the employer’s office such that there does not appear to be a requirement to maintain an office in the home under a contract of employment. Pursuant to subsection 8(10) of the Act, a signed form T2200 by the employer is required to be filed by the employee certifying that the employee was required under a contract of employment to use a portion of his or her home and acknowledge what expenses, if any, were or will be reimbursed. Accordingly, since the above requirement is not met, the deductions under 8(1)(i)(ii) (i.e. office rent or salary paid to an assistant) and (iii) of the Act (i.e., cost of certain supplies) are not available.

In our view, if the employer certifies on form T2200 as prescribed under subsection 8(10) of the Act that the conditions set out in subparagraph 8(1)(i)(ii) or (iii) of the Act are met, and that the employee is required to maintain an office in the employee’s home and the employee performed more than 50% the duties of office or employment in that work space, the fact that another work space is provided to the employee by the employer does not in, and by itself, deny the expenses pursuant to 8(13) of the Act.

Paragraph 6 of Interpretation Bulletin IT-352R2 explains that expenses which are not permitted by section 8 of the Act, cannot be deducted in computing income from an office or employment. Consequently, an employee who is not a commission sales employee as described in paragraph 8(1)(f) of the Act, cannot deduct expenses on account of house insurance.

The above comments are only expressions of opinion on the application of the Income Tax Act and as such, should not be construed as advance income tax rulings, nor are they binding on the Department.

We trust our comments are of assistance,

Yours truly,

J. F. Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy & Legislation Branch