Deducting Employment Related Expenses & T2200
Home Office, Vehicle, Travel and Other Deductions
By Nizam Shajani, CPA, CA, MBA
From time to time you will incur expenses that are necessary as part of your continued employment. To determine what expenses are eligible, we need to determine if you are a salaried or commission employee and have the conditions of your employment detailed on form T2200. The form will need to be signed off by your employer.
It is important that the form is completed correctly, including selecting yes when asked if the employee’s contract require them to pay their own expenses while carrying on the duties of employment. And of course, the employment agreement should support this position.
If you are required to travel to locations that are not the ordinary place of business or between different locations of your places of business and were not reimbursed for expenses incurred due to travel, you can claim travel allowances as a deduction.
Note if you received a motor vehicle allowance or have use of a company vehicle, this will limit the amount that can be deducted as travel expenses.
If you are required to be away for at least 12 consecutive hours from the municipality and metropolitan area of your normal place of business, you may be eligible to claim a food and beverage allowance.
If your contract for employment requires you to use a portion of your home for work, you may be able to expense a portion of your home gas, electricity, property taxes and other expenses incurred, however does not include mortgage payments or capital cost allowance. This calculation is usually based on the percentage of the home office used for work. However, there is a test to qualify for this deduction from your employment income.
If you are employed as a trades person, apprentice mechanic or in forestry operations and were required to provide your own tools as a condition of employment – you may be eligible to receive a deduction for these tools.
Commission employees have more leeway to claim expenses such as marketing, advertising and meals to entertain clients. However, total expenses incurred by commissioned employees cannot be higher than total commissions earned by that employee.
Note deductions for expense on your personal tax return may need to be supported by a T2200 signed by your employer as well as agreed to your employment agreement and supporting documents for the expenses incurred. Keeping this in order could net you some good tax savings, however this could also be a complicated part of your tax filings and care should be taken to have a defendable filing position.
This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. © Shajani LLP