Deducting Meals and Lodging Related to Employment
By Nizam Shajani, CA, MBA
If you incur costs related to employment such as overtime meals, travel to locations different from your employer’s place of business and incur expenses during travel for work – these costs may be deductible. To claim these deductions, your employer must complete and sign a T2200 form (declaration of conditions of employment) to be submitted along with your tax return. You will then have to complete a T777 (statement of employment expenses) along with your personal tax return.
Travel and Meals
Travel for work may result in out of pocket expenses for meals and lodging. These expenses include food, beverage, and lodging expenses. Oftentimes the employer will reimburse the employee for this travel. Generally, an allowance is non-taxable when it is based on a reasonable amount. However, if you did not receive an allowance or reimbursement for travel expenses, you are able to deduct a reasonable cost if you were normally required to work away from your employer’s place of business or in different places and under your contract of employment, or you had to pay your own travelling expenses. Food and beverages are deductible at 50% of the lesser of the amount actually paid or an amount that is reasonable.
There are two methods for calculating meals, the simplified and the detailed methods.
On September 3, 2020, the government announced an increase to the meal allowance from $17 per meal to $23 per meal and this was retroactive to January 1, 2020.
The simplified method is based on a daily meal rate of $23 per meal. You can claim one meal after every four hours from the departure time to a maximum of three meals per 24 hour period (and are away for a minimum of 12 consecutive hours). $69 per day can be used as a maximum meal allowance for which 50% (or $34.50 per day) will be deducible on your personal return.
Maintain a detailed list of the trips you take in a record or log book such as the following.
|Departure Date||Departure Time||Destination||Return Date||Return Time||Hour Away||Km Driven||Number of Meals|
|Jan 13, 2020||7:00am||Fort McMurray||Jan 14, 2020||7:00am||24||450||3|
The detailed method is similar to the above, however requires you to keep receipts to support the amount you are deducting. A column can be added for costs incurred.
Travelling expenses, including lodging can be deducted if you meet all of the following criteria:
- You were normally required to work away from your employer’s place of business or in different places.
- Under your contract of employment, you had to pay your own travelling expenses.
- You did not receive a non-taxable allowance for traveling expenses.
- You maintain a copy of form T2200
If you are paying an employee’s lodging, this amount should be included in the employee’s taxable income. There are some exceptions to this requirement. One of these include special work sites.
To be excluded under the special work site rules, all of the following must be included:
- The duties performed by the employee are of a temporary nature (may be interpreted as no more than two years).
- The employee maintained a principle residence at another location that was available for the employee’s use and where the employee could not be reasonably expected to return.
- The employee was away for a minimum of 36 hours.
Lodging exemptions may also be available for remote work locations and northern allowances.
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. © 2020 Shajani LLP