Expenses which can be claimed from Employment Income from your personal Tax Return
Often this question comes to our mind that “Can I claim my expenses from my employment income”? Many Salaried employees wish that they should also get their expenses deducted from their payroll income and could reduce the tax payment load.
The answer to above question is ‘YES’, that if you are an employee and your employer requires from you to incur employment expenses, then as a employee, you can deduct such expenses subject to certain conditions.
To explain in a simple manner, we can put the list of deduction of Expenses and categories of employees into the following manner:
Categories of Employment:
Under this category first and foremost point is to categorise employee based on the following 2 criteria.
- Salaried Employee with no commission income and
- An employee with commission income.
Here an ‘Employee with Commission Income’ means an employee who also earns commissions besides his / her payroll as well as those earning only commission income. A simple example of such employees are sales or marketing employees
It is very important to decide the above criteria, as Commission employees have some privileges as well as restrictions in deductibility of expenses, as compared to Salaried employees who are drawing only employment income.
Eligible Expenses which can be claimed as a deductible Expense:
Generally you can’t claim all the expenses you incurred to go to work, such as the cost of commuting to and from your work, or some special clothing etc. However, still you will be able to claim lot of other expenses which you have paid as per your employment conditions for example if your job requires you to travel for official work then you might be able to claim a reasonable amount of motor vehicle expenses.
CRA has a list of expenses which is also known as ‘eligible expenses’, which can be claimed as employment expenses for e.g. accounting and legal fees, meals, travel and lodging expenses, home office expenses, motor vehicle expenses etc.
ELIGIBLE EXPENSES FOR SALARIED EMPLOYEES AND COMMISSION EMPLOYEES
|
Eligible Expense |
Salaried Employees (Payroll only) |
Commission Employees (Payroll plus Commission or only Commission employees) |
|
Accounting and Legal Fees |
Legal fee paid to recover / establish a right to collect the salary. But if any legal fee amount recovered from employer then the same must be reduced from the total claim. |
In addition to expenses claimable by payroll employees, the commission employees can claim the accounting fee to file their income tax return |
|
Advertisement and Promotion |
Not claimable |
Commission employees can claim expenses towards advertising and promotion |
|
Food, Beverages, and Entertainment expenses |
These can be claimed / deducted if the employer requires you to be away for a period of atleast 12 consecutive hours. - Limit to the extent of 50% of the total amount only |
These can be claimed / deducted if the employer requires you to be away for a period of atleast 12 consecutive hours. - Limit to the extent of 50% of the total amount only |
|
Travel Expenses |
Can be claimed, if the conditions of the employment requires you to work away from your employer’s office |
Full amount can be claimable as long as the same is incurred to earn commission income |
|
Lodging |
Can be claimed if the work conditions require to travel away from employer’s business place |
Can be claimed if the work conditions require to travel away from employer’s business place |
|
Parking |
Can be claimed. However, parking expenses paid at the employer’s place of business is not deductible / claimable |
Can be claimed. However, parking expenses paid at the employer’s place of business is not deductible / claimable |
|
Office supplies (e.g. postage, stationery, Printer cartridge, etc.) |
Claimable like Stationery items, Postage and courier expenses etc. Cannot claim like calculator, briefcase etc. |
Same as Salaried Employees (No Change) |
|
Other expenses (Mobile phone, home internet, long distance calls etc.) |
Only payment towards basic mobile phone plans or official long-distance calls and reasonable home internet expenses. Cannot claim basic plan of landline, only cell phone plan is deductible. Lease payments / Finance Interest charges / CCA on laptop / Mobile phones are not deductible |
In addition to normal monthly bills, you can claim the reasonable payments of Lease of Computers, mobile phones etc. or Interest paid on money borrowed for these equipment. |
|
Salaries paid to Assistants |
Allowable as a deduction of Expense towards payment to your assistant / substitute |
Allowable (No Change) |
|
Office Rent |
Can be claimed as an expense only if your contract of employment requires you to rent an office and pay the expenses, else cannot claim deduction. |
Can claim as an expense, if paid to earn commission |
|
Work-space-in-the-home expenses |
Can be claimed provided the conditions of the employment requires to work from home. Refer blog on WORKSPACE IN THE HOME EXPENSES IN YOUR T1 |
Can be claimed provided the conditions of the employment requires to work from home. Refer blog on WORKSPACE IN THE HOME EXPENSES IN YOUR T1 |
|
Vehicle expenses |
Can be claimed, if the conditions of the employment requires to work away from your employer’s office |
Can be claimed, if the conditions of the employment requires to work away from your employer’s office |
It is important to note that though the commission earning employees can claim some additional expenses however there is a limit / restriction on the total amount of expenses which can be claimed, is to the extent of the ‘commission income’ only. However, interest and capital cost allowance (CCA) on the vehicle may be claimed from the regular employment income.
If the ‘commission income’ is not sufficient to cover all the expenses, then in such a case the commission employee can claim the expenses as a ‘Salaried employee’ instead of Commission Employee.
HOW TO CLAIM EMPLOYMENT EXPENSES IN INCOME TAX RETURN – T1
- You can claim the employment expenses in your personal income tax return i.e. T1 by providing the complete information in Form T777 of your T1 Tax return. The total of eligible claimable expenses will be calculated at line no, 9368 of T777 form and the same will also come on line no. 22900 of your income tax return i.e. T1 Tax Return
- Keep records of all the expenses you are claiming in your tax return like bills, invoices, receipts etc.
- Signed ‘Declaration of conditions of Employment’ in Form T2200 from your employer
Disclaimer: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.