Are you required by your employer to purchase tools or to pay for your own expenses? Did your employer reimburse you? Are you paid a salary or do you earn commission? You might be eligible to claim expenses that you did not know about.
Canada Employment Amount
The Canada Employment Amount credit was designed to cover work-related expenses such as uniforms, small supplies, and home computers and printers that you use for work. You can claim the lesser of:
- Your employment income on line 10100 and line 10400, or
- The tax year’s maximum amount (changes every year)
This amount is a refundable tax credit, which means you claim 15% of the actual amount on line 31260 of your tax return to reduce your tax liability. The employer provides all other needs for you to perform your job at the office or at home.
Employment Expenses
Some employers require their employees to pay for their own expenses that can be substantial. Or use their own vehicles or tools at work. The CRA allows employees to claim some expenses that has been approved by their employer as a deduction on line 22900.
Remember the keyword here is employees. This deduction is not available for self-employed Canadians. The employments expenses deduction allows you to claim the full amount of expenses instead of just 15% as the Canada Employment Amount. However, you cannot claim a negative amount on line 22900, but you can transfer the excess to future years.
The general expenses that can be claimed under the T2200 are:
- Accounting and legal fees: legal fees to establish the right of salary
- Travel expenses: meals, lodging, and transportation other than motor vehicle expenses
- Parking: only during work time and not at the main employer’s workplace
- Office supplies: consumable expenses such as pens, paper, cleaning supplies, etc.
- Salary expenses: salary paid to an assistant
- Office rent: renting a space to work or meet clients
- Motor vehicle expense: vehicle operating expenses and CCA
- Work-space-in-the-home expenses: percentage of the home expenses related to earning income
Types of Employment Expenses
There are several types of employment expenses; which each has its own eligibility conditions and allowable expenses:
- Salaried employees
- Commission employees
- Transportation employees
- Forestry operations
- Employed artists
- Employed Tradesperson
- Employed Apprentice Mechanics
Salaried Employees vs Commissioned employees
The most common types of employment expenses are claimed under the salaried and commissioned employees. Apart from motor vehicle expenses that have the same rules under both types of employments, commissioned employees can claim extra costs that are not allowed for salaried employees:
- Entertainment: 50% of the costs of entertaining clients but not the costs of club memberships.
- Advertising and promotions: business cards, flyers, newspaper advertisements, and gifts.
- Accounting fees: the cost of preparing and filing the employment expenses form (T777)
- Home insurance and property taxes: claimed under home office expense.
One major restriction for a commissioned employee, your expenses cannot exceed the total of your commissioned income (Box 42 of the T4) plus the CCA and the interest on your vehicle. On the other hand, commissioned employees can claim the allowable expenses against their salary instead of their commission but they have to be limited to the salaried employee eligible expenses. The only advantage of doing so, is that you can carry your losses to future years.
For example;
Amanda’s total income last year was $10,000 that includes $5,000 in commission. Her expenses are as follows:
- Entertainment $150
- Office supplies $500
- Cellular long distance $2,500
- Assistance employee $3,000
- Vehicle expenses including CCA $4,000 (no interest)
- Work percentage property taxes $200
- Work portion home utilities $1,000
If Amanda chooses to file as a commissioned employee:
- She will be eligible to claim all the expenses which total $11,350
- However, she is limited to her commission income and the CCA and interest on her vehicle which is $5,000 + $4,000 = $9,000
- So Amanda can claim $9,000 of her expenses and will lose the remainder of the expenses
If Amanda chooses to file as a salaried employee:
- Her total expenses will exclude entertainment costs and property taxes. Her total expenses = $11,000
She can claim $10,000 of her expenses this year (maximum = earned income), and carry forward $1,800 to the next year to claim it against the income from the same employment.
Meals and lodging
Whether you are driving a passenger vehicle or a long haul truck, you will need the TL2 Claim for Meals and Lodging Expenses form signed by your employer to allow you to deduct these expenses.
Lodging: The TL2 form allows you to itemize all trips you made to earn income by date and duration. You calculate the total cost of lodging (including shower facilities) for all the trips and deduct the full amount.
Meals:
- The allowable meals start 4 hours after you leave your municipality
- Your shift has to be at least 12 hours
- You can claim a maximum of 3 meals per day
- You have to purchase the meal to be able to claim the cost
- You can use the detailed method to claim the actual cost, or use the simplified method and claim a flat rate of $23 per meal ($23 US for meals purchased in the United States)
- Long haul trucker can claim 80% of the allowable meals expenses
- All other transport employees can claim 50% of the allowable meal expenses
- You claim a flat rate of $34 per day for groceries instead of the 3 meals per day if your work with a crew (fire station, railway, etc.) and your employer provides you with a cooking facility
Claiming Capital Expenses
Tools and equipment are considered capital expenses and cannot be claimed as employment expenses except for the following conditions:
You are employed as a trade person or an apprentice mechanic:
- Tools must be acquired in the year you are claiming them and approved by your employer
- Tools must not have been used for any other purpose
- Tools cannot be an electronic or communication device (except measuring equipment)
- You can deduct the tool costs including GST/HST paid
- You may be able to get a rebate of the GST/HST you paid. For more information, see GST/HST Rebate.
You are employed in the forestry operation:
- You deduct the cost of a power saw in the year you purchased it.
- Subtract from the purchase price of the new power saw the value of any trade-in or any amount you received from the sale of any power saw during the year.
- You had to pay for the power saw under your contract of employment and your employer will not be reimbursing you.
- You may be able to get a rebate of the GST/HST you paid. For more information, see GST/HST Rebate.
You are employed as an artist or musician:
- You cannot deduct the costs of musical instruments, but you can deduct the expenses of the equipment rental, maintenance, insurance paid on the equipment, CCA if you own the equipment/ musical instruments.
- You can deduct general expenses such as advertising, traveling, etc.
- You may be able to get a rebate of the GST/HST you paid. For more information, see GST/HST Rebate.
- You don’t need a signed T2200 form to claim the instruments but you will need a signed form to claim other employment expenses
- Your claim is limited to the lesser of:
- the expenses you actually paid last year, or
- the lesser of:
- $1,000, or
- 20% of your employment income from artistic activities
- minus musical instrument expenses, interest, and CCA on your motor vehicle
Employment Expenses and Your Income Tax Return
As mentioned earlier, you need a signed T2200 from your employer to be able to claim any expenses you incurred to earn income. Keep the form for your record in case CRA might request a copy for reference. Similar, the TL2 form has to be approved and signed by your employer if you are claiming lodging and meal expenses. You are required to file the T777 form with your tax return. Report the allowable expenses on line 22900 and the GST/HST rebate on line 45700.
Salaried and commissioned employees who reside in Quebec should complete the TP-64.3-V form and signed it by their employers. Complete the TP-59-V form to claim the expenses in your TP-1-V tax return.
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