TaxTips.ca - Employment Expenses

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Employment Expenses

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What employment expenses are deductible?

Employee work-space-in-home expenses

Income Tax Act s. 8(13)

Employees may deduct work-space-in-home expenses if their contract of employment requires them to pay the expenses, and the expenses are not reimbursable by the employer. Canada Revenue Agency (CRA) form T2200, Declaration of Conditions of Employment, should be completed by the employee and employer in order to claim these expenses.

In order for any expenses to be deductible, the work space must be either:

the place where the individual mainly does their work, or
used exclusively for earning employment income, and used on a regular and continuous basis for meeting customers or other persons in the course of performing the job.

Allowed expenses include heat, electricity, light bulbs, cleaning materials, maintenance, etc. If the home is rented, a reasonable portion of the rent may be deducted. Mortgage interest and capital cost allowance may not be deducted.

Sales commission employees eligible to deduct work-space-in-home expenses may also deduct a reasonable portion of property taxes and home insurance.

CRA form T777, Statement of Employment Expenses, is used to calculate the amount of the work-space-in-home expenses allowed.

The work-space-in-home expenses can only be used to reduce employment income. They cannot be used to create or increase a loss from employment income. Any expenses in excess of the employment income can be carried forward to be used in the next tax year.

The work-space-in-home expenses will include any GST/HST or provincial sales taxes incurred. You may be eligible for a refund of the GST/HST included in the costs. See Employee and Partner GST/HST rebate on the GST/HST page.

Employee motor vehicle travel expenses

Income Tax Act s. 8(1)(h.1), s. 8(1)(j)

This is discussed on the Business page under the topic Automobile (passenger vehicle) / motor vehicle expenses - Employees.

See also What expenses are included as motor vehicle expenses on the Business page, as well as the article on Trip logs.

The motor vehicle expenses will include any GST/HST or provincial sales taxes incurred. You may be eligible for a refund of the GST/HST included in the costs. See Employee and Partner GST/HST rebate on the GST/HST page.

Other employment expenses

Income Tax Act s. 8

Some other expenses may be deducted from employment income. Examples are:

legal expenses incurred to collect or establish a right to amounts owed to the taxpayer that would be included in the taxpayer's employment income when received. See the CRA interpretation bulletin IT-99R5 Legal and Accounting Fees.

certain clergy residence rent (or fair rental value for a residence owned by the taxpayer, the taxpayer's spouse or common-law partner) and utility costs. See the CRA interpretation bulletin IT-141R Clergy residence deduction, and CRA web page Line 231 Clergy residence deduction.

dues and other expenses, including

annual professional membership dues paid to maintain a professional status recognized by statute. See CRA interpretation bulletin IT-158R2 Employees' professional membership dues.

office rent, or salary paid to an assistant or substitute, if the payment is required by the contract of employment

employer's CPP and EI premiums paid on the salary of an assistant or substitute

cost of supplies consumed directly in employment duties, if the payment of these costs is required by the contract of employment

annual union dues. See CRA web page Line 212 Annual union, professional or like dues.

employee's registered pension plan contributions. See CRA interpretation bulletin IT-167R6 Registered pension plans - employee's contributions.

employee's contributions to a retirement compensation arrangement. See CRA Guide T4041 Retirement compensation arrangements.

salary reimbursement, or disability payment reimbursement

forfeited amounts under a salary deferral arrangement

forfeited amounts under an employees profit sharing plan. See CRA interpretation bulletin IT-379R Employees profit sharing plans - allocations to beneficiaries.

Other employment expenses which may be deductible and are explained in the CRA guide T4044 Employment Expenses, include:

meals and lodging expenses of railway and other transport employees. These expenses are claimed on the CRA form TL2 Claim for Meals and Lodging Expenses.

meals can be claimed using the simplified method (see CRA information on meals and lodging expenses for employees), under which receipts are not required, but a log of travel is required. Under this method, the allowable amount for meals is

$17 per meal,

one meal after every 4 hours from the departure time, to a maximum of 3 meals per day

meals are 50% deductible, except for meal costs during eligible travel periods of long-haul truck drivers, which are deductible at the following rates:

65% for 2008

70% for 2009

75% for 2010, and

80% for 2011 or later.

See CRA information on transportation employees

costs of power saws for employees working in forestry operations

sales expenses of commission employees (complete a TD1X form to have income tax deductions based on your net commission income after expenses)

travel expenses, when the employee is required to carry on the duties of employment away from the employer's place of business or in different places, and is required under the contract of employment to pay the travel expenses incurred.

musical instrument costs for taxpayer employed as a musician. This includes maintenance, rental, insurance, and capital cost allowance. See also CRA interpretation bulletin IT-525R Performing artists.

artists' employment expenses. See also CRA interpretation bulletin IT-525R Performing artists.

tool costs of eligible employed tradespersons and apprentice mechanics - see T4044 Employment Expenses Chapter 7 Employed Tradespersons

In order to claim many of the above deductions, CRA form T2200, Declaration of Conditions of Employment, should be completed by the employee and employer.

The above deduction amounts will include GST/HST and any provincial retail sales tax paid. You may be eligible for a refund of the GST/HST included in the costs. See Employee and Partner GST/HST rebate on the GST/HST page.

The cost of special clothing or footwear required for your job is not deductible. However, special clothing or footwear provided by or reimbursed by the employer will not be considered a taxable benefit to the employee under certain circumstances:

When the employer provides a distinctive uniform, or protective clothing or footwear that is designed to protect them from workplace hazards, this is not a taxable benefit.

If the employer pays an allowance to the employee for purchasing these items, and the employee is required to provide receipts, this is not a taxable benefit.

If an allowance is paid to the employee for the purchase of protective clothing, and the employee is not required to provide receipts, the amount paid will be a taxable benefit to the employee unless all of the following conditions are met:

the law requires the employee to wear the protective clothing on the work site,

the employee purchased the protective clothing, and

the amount paid is reasonable.

The information in the preceding paragraph can be found in CRA guide T4130 Employers' Guide Taxable Benefits, at page 27 under the topic "Uniforms and special clothing".

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Revised: March 03, 2010

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