When you are an employee, you may be able to deduct expenses from your employment earnings if you meet certain conditions.
Deducting expenses against employment earnings are much more limited than deducting expenses against self-employment income. Before you can deduct any expenses, your employer must provide you with a completed and signed form, T2200 Declarations of Conditions of Employment. Your employer must provide one for each taxation year. Your employer must specify the type of expenses you (as a taxpayer) were required to incur in the course of your employment duties, that your employer a) did not reimburse you for, or b) paid you a reasonable taxable allowance.
In general, the types of expenses you may be able to deduct would include advertising, meals and entertainment (deductible at 50%), office, automotive (fuel, repairs and maintenance, insurance, registration, leasing costs, interest expense on loans), tools (for apprentices and tradespersons), and home office, under limited circumstances. These expenses are subject to what your employer specifies on the completed T2200 form.
To be able to deduct automotive expenses, you must track all expenses and be able to provide all receipts to Canada Revenue Agency (CRA) in the event they request them. In addition, you must track the number of kilometers you drove to earn employment income, as well as the total number of kilometers driven in the year. You may also be required to provide documentation in how your vehicle usage relates to your employment.
There are a couple of occupations where special rules apply:
- Commissioned employees – Deductions are limited to the total amount of commissions paid as reported on your T4. Commissioned employees are eligible to deduct more home office expenses than other employees. For example, commissioned employees can deduct insurance and property taxes, whereas other employees are not able to.
- Long Haul Trucking (Transport Business) – If you work in the transport industry, and regularly have to travel away from the municipality or metropolitan area where your employer’s home terminal is located, and you regularly incur meals and lodging expenses while away from the municipality or metropolitan area you may be eligible to deduct the cost of meals, lodging and showers as an employment expense.
There are two methods available to calculate the deduction: the Simplified Method and the Detailed Method.
Using the Simplified method, you can deduct $23 for each meal (to a maximum of 3 meals per day) for each day you are away from the home terminal. Using this method, you are not required to keep receipts.
If you choose to use the detailed method to calculate your expenses, you will have to keep a log book, or record book with an itemized listing of expenses. You will be required to keep all receipts.
To be able to claim these expenses, you will be required to provide a completed and signed TL2 Claim for Meals and Lodging Expenses from your employer. I would also suggest you be able to support your claim with your logbook.
- Tradesperson – if you purchased eligible tools to earn income as a tradesperson, you may be able to claim the cost of tools. Your employer will still be required to provide you with a completed and signed T2200 Declaration of Conditions of Employment form (Part B , question 11).
- Apprentice Mechanic – if you were employed as an apprentice mechanic, you may also be eligible to claim additional expenses (in addition to the Tradesperson tool deduction). Your tool must meet conditions to be eligible, and would include your toolbox.
Your employer must also provide a completed and signed T2200 Declaration of Conditions of Employment form (Part B , question 12).
For the Tradesperson and Apprentice Mechanic tools expense, there is a formula to determine the amount you would be permitted to claim. Please contact your tax advisor to determine if you are eligible to claim these expenses.
