Equity markets continue rising

The Toronto S&P TSX Composite index has had a strong run over the last 2 weeks. It has posted daily gains in nine of the last 10 trading sessions and has risen 6.5% over that time and is up 5.89% year-to-date. The TSX closed Friday at an all-time high of 18,460.21.

The Nasdaq closed above 14,000 for the first time on Tuesday and hit an intra-day all-time high of 14,102.04 on Friday before closing at 14,095.47. Year-to-date the Nasdaq is up 9.37%, continuing its torrid pace.

The S&P 500 is up 4.77% year-to-date and continues its march toward the 4,000 mark. Friday saw the S&P 500 hit an all-time intra-day high of 3,937.23 before closing at 3,934.83.

Most major European and Asian markets – even London’s FTSE 100 – posted weekly gains and are all positive for 2021 year-to-date.

Working from home: calculating your workspace deduction percentage

We have had several clients reach out with questions around tax deductions for employment expenses incurred while working from home throughout COVID, and specifically, how to calculate the appropriate workspace percentage.

As a reminder, there are two options for claiming home expenses: the temporary flat rate method ($2 per day worked at home, up to $400 maximum) or the usual detailed method. You can read a more thorough breakdown of these options here.

When calculating your workspace at home, you must prorate your workspace versus total home space, but you must also prorate your work time spent in your workspace within the context of a full week’s worth of hours.

For example: Jim worked from home from March until December 2020. His home is 1,300 square feet and his workspace is his living room/dining room, which is 300 square feet in size.

The first step in calculating the percentage of home expenses is to prorate the workspace by the total home space. In this case, 300 / 1300 = ~23%.

Next, Jim must consider that he is only using that workspace for 40 hours per week (his normal work week). There are 168 hours in a week (7 days, 24 hours per day). The second calculation is to divide Jim’s 40 hours by 168, giving him 24%.

So for work, Jim uses 23% of his home, 24% of the time. Multiplying these two amounts, Jim’s deductible percentage of home expenses is ~5.5%.

Using the detailed method of calculating home expenses is not worthwhile unless Jim ends up with a tax saving greater than the $400 flat rate method. In order to deduct more than $400 using the detailed method, Jim would need to have eligible home expenses of ($400 / 5.5%) ~$7,300.

A reminder to contact us if you have questions about your home use percentage or what constitutes and eligible expense. We can work with you to determine if the flat rate method or detailed method is the most applicable to your situation.

Weekly Update – By The Numbers

Sources: Yahoo! Finance, CNBC.com