Because employers are generally required to pay for the premises, assets and supplies used up by their employees in performing their duties, the employees themselves have few out-of-pocket costs to claim on the tax return. In some cases, the employee will have expenditures, but to claim them, very specific procedures must be followed.
For example, the employer, must verify in writing on Form T2200, Declaration of Conditions of Employment, that no expense reimbursement was provided to the employee and that the out-of-pocket payments were required as a condition of employment. Partial reimbursements must be declared before expenses are claimable.
Provided that step is met, examples of deductible expenses include supplies used up directly in the work (stationery, maps, etc.), salaries paid to an assistant (including spouses or children if Fair Market Value (FMV) is actually paid for work actually performed) and office rent or certain home office expenses. Form T777 Statement of Employment Expenses must be completed.
Certain specific profiles of employees may have special types of expenses, specific to their work, which can be claimed. For example, employed artists are allowed to claim the cost of supplies used up in their employment to a maximum of 20% of net income or $1,000, while and long distance truck drivers may claim the cost of board and lodging according to specific rules while en route – up to 80% of costs in most cases.
Commissioned salespeople may have promotions and entertainment costs as well as travel, auto or home office expenses.
In addition, certain tradespersons may claim the cost of tools purchased (in excess of a threshold amount) if required by their employer for use in their employment ($500 maximum claim). Loggers may claim certain power saw costs.
Employed teachers can claim a new refundable tax credit for the first time in 2016: the Teacher and Early Childhood Educator School Supply Tax Credit is worth a maximum of $150 (15% of $1000) and can include consumable items such as construction paper, art and science supplies, stationary and pens or pencils, containers, posters, games, puzzles, books, software and so on.
For more guidance on the deductible expenses of employees, consult a DFA-Tax Services Specialist™.
Posted under: Income Tax