If you happen to be an employee, you’re no doubt aware that tax deductions for employees are about as rare as hen’s teeth. Still, you may be entitled to claim a thing or two on your tax return this year. Here are the top 10 (and there aren’t many more than just 10) deductions for employees.
Vehicle expenses. If you were normally required to work away from your employer’s place of business, had to pay for your own vehicle costs (parking costs included – but not parking at your normal place of work) and weren’t entitled to a reimbursement or a tax-free allowance, then you can deduct your work-related portion of your vehicle costs. Your employer will have to sign Form T2200 (Form TP-64.3V in Quebec). If you received an allowance but it wasn’t sufficient to offset your vehicle expenses, you can include that allowance in your income and deduct your actual expenses – which could leave you better off.
Sales expenses. If you’re a commissioned employee, you’re able to deduct more than the rest of us and the deductions are almost as broad as those available to a self-employed person, including advertising and promotion costs, half of your work-related food and entertainment costs and more. The catch is that your total deductions can’t exceed your commission income for the year. Further, you had to be required to pay your own expenses, had to work away from your employer’s place of business, were not reimbursed and didn’t receive a tax-free allowance for the costs and your employer must sign Form T2200.
Cost of supplies and tools. You can claim a deduction for certain supplies used directly in your work, including stationery and business cards, toner and ink, work-related air-time costs for a mobile phone and a portion of your basic mobile phone service if you can substantiate the minutes or data consumed for work purposes (connection fees and purchase costs are not deductible). Sorry, but clothing and tools are not deductible (although tools for a tradesperson or apprentice mechanic can be deductible).
Food and beverage costs. You can deduct food and beverage costs if your employer requires you to be away for at least 12 consecutive hours from the municipality and metropolitan area (if there is one) of your employer’s work location and you weren’t reimbursed and didn’t receive a tax-free allowance. You’ll be limited to claiming half of your costs (or half of what Canada Revenue Agency calls “a reasonable amount” – whichever is less). Don’t forget, your employer needs to sign Form T2200.
Travel costs. Separately from food, beverages and vehicle costs, you can deduct travel costs such as airfare, trains, buses, hotels, etc., provided you were normally required to work away from your employer’s place of business, you had to pay your own travel costs, did not receive a reimbursement or tax-free allowance and your employer signs Form T2200.
Work space in the home. If you work from home, you can deduct certain costs if that office is your principal place of work (more than half your working time is spent there), or it’s designated solely for your work and is used on a regular and continuous basis for meeting customers or clients. Your employer will have to sign Form T2200 verifying that you’re required to have that office. Employees are restricted to claiming a portion of any rent, utilities, repairs, maintenance and supplies associated with the office space. Commissioned salespeople can add a portion of property taxes and home insurance. Sorry, but you can’t claim mortgage interest.
Legal fees. These fees may be deductible if you paid them to collect or establish a right to salary, wages, pension benefits or a retiring allowance (including damages or settlements for wrongful dismissal) that are owing to you.
Assistant’s salary. If your employer requires you to hire and pay for your own assistant, you’ll be entitled to deduct reasonable compensation paid to that person – even if you hire your spouse or another family member.
Capital cost allowance. You can claim a deduction for capital cost allowance (CCA, or depreciation) if you used your vehicle for work and were entitled to a deduction for vehicle costs. You can also claim CCA on a musical instrument if you had to provide one in your work.
GST/HST rebate. If you’ve deducted any employment expenses and paid GST or HST on those costs, you can apply for a rebate of that GST/HST by filing Form GST370. The rebate is taxable in the year you receive it.
Tim Cestnick, FCPA, FCA, CPA(IL), CFP, TEP, is an author, and co-founder and CEO of Our Family Office Inc. He can be reached at email@example.com.