Employee loans are subject to an imputed taxable interest benefit that is computed at the CRA prescribed interest rate and applies throughout the period the loan is outstanding. If you pay interest on the loan at a rate that is at least equal to the CRA prescribed interest rate, and such interest is paid by January 30 for the preceding calendar year, then the imputed interest benefit does not apply.
Interest paid to your employer on these loans is only deductible to you if the loan is used to earn income from business or property. If the loan is used for personal reasons, the interest is not deductible. If the interest on the employee loan is not deductible, be sure to pay any interest payable on the loan for 2021 by January 30, 2022 to reduce or eliminate your taxable benefit. Where the interest on the loan is not paid by January 30, the imputed interest benefit discussed above will apply.
If you have an existing employee interest-bearing loan that was used for one of the qualifying purposes listed above (e.g., home purchase), consider renegotiating the loan with your employer to minimize taxable benefits by “locking in” the loan at a lower prescribed interest rate for a five-year term. The prescribed interest rate currently in effect is one per cent.
If you worked from home more than 50 per cent of the time in 2021, you may be eligible to deduct home office expenses. As an employee, you will need to obtain a Form T2200 from your employer to be eligible for the deduction. You may be able to deduct utilities, internet, property tax/rent and other expenses related to your home office. For the 2020 tax year, the government introduced a simplified home office expense deduction of up to $400 for all employees who worked from home. A similar deduction has not (at least yet) been introduced for 2021.
The Department of Finance has amended legislation that would allow Canadians receiving EI benefits to claim the Child Care Expense Deduction for 2021. Under the pre-pandemic rules, EI recipients were not able to deduct Child Care Expenses against their EI income.