Deducting Employment Related Expenses & T2200 or T2200S
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.
Note for the 2020 tax filing year in recognition of the unique circumstances of COVID-19 and the requirements to work from home, a new short form T2200S is available along with a temporary flat rate. There are now three methods to claim expenses for the cost of working from home.
Temporary Flat Rate
No employer certification is required. You also do not require receipts. This deduction is available for employees who had to work from home due to COVID-19. The deduction is calculated at $2 per day worked at home to a maximum total deduction of $400.
Simplified Method T2200S
The employee will need to get their employer to complete and sign a T2200S. This deduction is available for employees who had to work from home due to COVID-19. The employee can claim the actual amounts paid that were not reimbursed by the employer. Supporting receipts will be required for this deduction and only for working from home expenses.
Detailed Method T2200
The employee will need to get their employer to complete and sign the T2200. This is the historical form and more detailed than the T2200S. However, this form entitles the employee to deduct any employment related expenses. The reason for working from home should be a requirement by the employer. The employee can claim the actual amounts paid that were not reimbursed by the employer. Supporting receipts will be required for this deduction.
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 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 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 other than expenses incurred for working from home on your personal tax return 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. If you are only deducting expenses related to working from home this can be done by having a completed T2200S. You also have the option to use the Temporary Flat Rate for the 2020 tax filing year.
Shajani LLP Chartered Professional Accountants and Advisors have a team of Calgary Accountants, Edmonton Accountants and Red Deer Accountants ready to assist you in your personal tax filings.
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. © 2021 Shajani LLP.
Shajani LLP is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning services.