Remote work can affect your taxes in a number of different ways. Logistically, remote work can make it challenging to understand who you’re supposed to remit taxes to. On the other hand, remote work can come with a number of different potential tax breaks.
In this article, we’re going to cover who you need to pay taxes to while working remotely, as well as which tax credits and deductions you may be able to take advantage of. We’ve written this piece to help. Whether you work blocks away or countries away from your employer, if you’re a remote worker in Canada, you’ll find useful information here.
Where Do I Pay Income Taxes As a Remote Worker?
In almost all cases, remote workers have tax obligations to the jurisdiction in which they are a tax resident. That’s a fancy way of saying that you owe taxes to the province and country you live in, regardless of where your employer is located. There are some exceptions to this rule—diplomats are one edge case that comes to mind—but for the vast majority, it’s the only rule you have to remember.
Your Income Tax Obligations: Working Interprovincially
When you file your income tax return in Canada, you’re remitting taxes to two entities: The federal government and the provincial government. Regardless of which province your employer is located in, you will pay income tax to the province you reside in.
The Canada Revenue Agency collects taxes for provinces and the federal government; as usual, you’ll only need to file one T4 per employer.
Your Income Take Obligations: Working Internationally
Working in Canada when your employer is in another country is similar to working interprovincially: You live in Canada, so you owe taxes in Canada. That makes a lot of sense—you’re using Canadian infrastructure and services, after all!
Your foreign employer may be headquartered in a country with which Canada has a tax treaty, like the United States. In these cases, you may be exempt from paying taxes on your employment income in those countries.
On the other hand, if you are a Canadian citizen working abroad, you may have to pay taxes both to the Government of Canada and the government of the country in which you are residing. These cases are complex; you should speak to an accountant to ensure you’re paying taxes to the right country.
What Tax Credits and Deductions Can I Take As a Remote Worker?
The Home Office Expense for Employees
The most well known (and often biggest) tax credit for employees with remote work arrangements is the home office expense for employees. This credit is extended to Canadian taxpayers who work from home and have to pay home office expenses essential to their employment. These expenses can include utilities (like water and electricity), internet fees, repair costs, rent paid, and more.
You cannot claim all of your utilities and other expenses as part of the home office expense credit—only a portion. This portion depends both on the size of your workspace and how often you use it for work. We recommend reading the home office expenses for employees page on the Government of Canada’s website.
Other Tax Credits and Deductions for Remote Employees
There are several different credits and deductions you may be able to claim if they are necessary for your work, including:
- Professional fees (accounting and legal fees)
- Motor vehicle expenses
- Travelling expenses
- Work-related tools
- And more
There are even more claims you can make if you’re self-employed—but we’ll stick to what you can deduct when you’re employed by someone else. You can learn more about other employment expenses you can claim.
When you work remotely, your tax situation may become more complex—but it doesn’t need to feel unmanageable. Canada’s tax rules try to simplify things for remote workers, but taxes are complex at the best of times. From claiming home office expenses to understanding what country you owe taxes to, we can help you with your Canadian tax return. Click here.