Tax-Deductible Expenses for Commission Employees

Who Qualifies as a Commission Employee?

A commission employee is someone who has part of their income based either on sales or another kind of achievement. To qualify as a commission employee, you must meet all of the following criteria:

• As part of your employment contract, you must cover the cost of your own expenses
• You are normally required to work away from your employer’s place of business
• You are paid a portion or all of your earnings in commissions, based either on volumes of sales or on contacts you negotiated
• You do not receive any non-taxable allowances for travelling, such as a kilometre allowance
• You receive a form T2200, Declaration of Conditions of Employment, annually, which is completed and signed by your employer

What Expenses Can Be Claimed?

As a commission employee, there are a variety of expenses that you can claim on Form T777, Statement of Employment Expenses, when you file your personal income tax return. These costs commonly include accounting fees, legal fees, and costs for business cards, promotional gifts, cellphones, and computers.

If you are using your own automobile for employment purposes, you are able to claim a portion of the costs associated with work-related transportation. These automobile expenses include fuel, maintenance, insurance, registration fees, parking, and any interest or leasing costs.

Any time you are hosting a client at an event, you can deduct 50 percent of the amounts you spend on food, beverages, tickets, and entrance fees for an event as Entertainment Expenses.

If you are required to be away from the office for over 12 hours at a time, you can also claim food and beverage costs. These costs refer to meals for yourself, not those for entertaining a client, and are subject to the 50% rule as well.

Another worthwhile advantage is the ability to claim workspace-in-the-home expenses. Commission employees can claim expenses which the regular salary employees cannot:

• Entertainment costs except for golf club and membership fees
• Advertising and promotions
• Accounting fees
• Capital Cost Allowance CCA
• Car interest
• Home insurance and property taxes when claiming home-office expenses

How Are the Claims Supported?

You must keep records to support all of your claims. This includes all receipts, cancelled cheques, invoices, credit card statements, and any other documentation that supports the amounts you claim. The receipts must show the date you made the purchase, your name and address, and the name and address of the seller. They must also have a full description of the product or service purchased, as well as any information regarding GST/HST on the purchase.

Any automobile expenses must be supported by a kilometre log, which shows the total number of kilometres you drove for employment purposes during the year. Each log entry should show your odometer reading before and after you travel.

Your employment kilometres are a percentage of the total kilometres drove, and this percentage is used to determine the portion of expenses you can claim for your automobile. You do not need to submit your kilometre log or automobile maintenance receipts with your tax return. However, you must keep them all on file in the event that you are reviewed at a later date.

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.

Which TurboTax Is Best for You?

TurboTax products offer an easy step-by-step guide to help you report your T2200 and fill out the T777 form. Consider TurboTax Live Assist & Review if you need further guidance, and get unlimited help and advice as you do your taxes, plus a final review before you file. Or, choose TurboTax Live Full Service^* and have one of our tax experts do your return from start to finish.

*TurboTax Live™ Full Service is not available in Quebec.