You can use the T777: Statement of employment expenses to claim employment expenses if, you’re a salaried or commission employee and you paid for eligible employment expenses that were not reimbursed by your employer.

A T2200: Declaration of conditions of employment will be issued to you by your employer indicating the employment expenses you were required to pay as part of your employment conditions. If you’re a resident of Québec, you’ll also received a completed TP-64.3-V: General employment conditions form.

Click one of the links below for an in-depth look at the eligible employment expenses you might be able to claim:

• Salaried employees – eligible expenses
• Commission employees – eligible expenses

Other types of employment expenses can include:

• Employed tradespersons
• Apprentice mechanic tools expenses
• Musical instrument costs
• Artist’s employment expenses
• Other expenses

Note: If you’re a resident of Québec, you will also need to complete a TP-59-V: Employment expenses of salaried employees and employees who earn commissions. Fortunately, the T777 and TP-59 forms are combined in H&R Block's tax software. Residents of Québec should also consult Revenu Québec’s Deduction for employees required to pay certain expenses.

Tax Tips:

• If you’re a transportation or a trucking employee and you wish to claim the cost of meals, lodging, and showers while on the road, you’ll need to complete form TL2. 
• When claiming expenses, be sure to hang on to any receipts or documents that support your claim in case the Canada Revenue Agency (CRA) or Revenu Québec asks to see them at a later date.

 

Where do I claim this?

Follow these steps in H&R Block’s tax software to file your 2016 taxes:

1. Under the PREPARE tab, click the LET'S TALK ABOUT 2016 icon.
   
   
2. Select the checkbox labelled I was employed. You will find yourself here:
   
   
   
   
3. Under the EXPENSES heading of the Employment & self-employment page, select the checkbox labelled Statement of employment expenses then click Continue.
   
   
4. When you arrive at the Employment expenses page, enter your information into the tax software.
   
   

 

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Salaried employees and employees earning commission income 

General expenses

You can deduct certain expenses you paid to earn employment income or commissions, provided you were required to pay for these expenses under a contract of employment.

Keep in mind, if you earn commission income, you’ll need to meet the following employment conditions in order to deduct expenses:

1. You had to pay your own expenses under a contract of employment.
   
   Note: You are not considered to have paid your own motor vehicle expenses if your employer reimburses you or you refuse a reimbursement or reasonable allowance from your employer.
    
2. You were normally required to work away from your employer's place of business.
3. You were paid in whole or in part by commissions or similar amounts. These payments were based on the volume of sales made or the contracts negotiated.
4. You didn’t receive a non-taxable allowance for travelling expenses. Generally, an allowance is non-taxable as long as it’s a reasonable amount. For example, an allowance for the use of a motor vehicle is usually non-taxable when it’s based solely on a reasonable per-kilometre rate.
5. You have a copy of Form T2200: Declaration of Conditions of Employment, which has been completed and signed by your employer.

Your employment expenses might also include any GST/HST and provincial tax you paid on them.

• Accounting and legal fees

You can deduct legal fees you paid in the year to collect or establish a right to collect salary, wages, or other amounts that need to be reported as employment income even if they’re not directly paid by your employer. However, you’ll need to reduce your claim by any amount that was awarded to you or reimbursed to you for your legal expenses.

If you earn commission income, you can also deduct reasonable accounting fees for help in preparing and filing your tax return. 

• Advertising and promotion

If you earn commission income, you can deduct advertising and promotion expenses such as amounts you paid for business cards, promotional gifts, newspaper ads, and radio and TV advertisements. 

• Meals and beverages

Salaried employees and those who earn commission income can deduct food and beverage expenses as long as your employer requires you to be away for at least 12 consecutive hours from the municipality and the city (if applicable) of the location where you normally report for work. The most you can deduct is 50% of the lesser of:

• the amount you paid and
• an amount that is reasonable in the circumstances

The 50% limit also applies to the cost of food and beverages you paid for when you travelled on an airplane, train, or bus, as long as the ticket price did not include these amounts.

If you’re an employee who earns commission income, you can also claim entertainment expenses such as tickets and entrance fees to entertainment and sporting events. The 50% rule applies to entertainment expenses too.

• Lodging

If your work required you to travel away from your employer's place of business and you paid for your own lodging such as for a hotel or motel room, you can deduct these amounts.

• Parking

You can deduct parking costs related to earning your employment income if you meet the conditions listed in the Allowable vehicle expenses section below.

Generally, you can’t deduct the parking costs at your employer's office, such as monthly or daily parking fees or the cost of traffic infractions such as speeding tickets. These are personal costs.

• Supplies

Supplies include items such as stationery items, stamps, envelopes, cost of postage, toner, ink cartridges, street maps, and directories. You can deduct these expenses only if you paid for these supplies or if you were paid for these supplies and they were included in your income.  

Note: Supplies don’t include items such as briefcases or calculators. You also can’t deduct the cost of special clothing that you wear to work or tools that are considered equipment unless you’re a tradesperson (see the Employed tradesperson section below).

• Other expenses

You can deduct a number of other expenses such as any licence fee that you paid to do your work, salary paid to an assistant or a substitute, office rent to earn commission income, and training costs. Refer to the Canada Revenue Agency (CRA) website for a full list of other expenses that can be deducted from your employment income.

Allowable vehicle expenses

As a salaried employee, you can deduct the expenses you paid relating to the motor vehicle you used to earn employment income, as long as you meet all of these conditions: 

1. You’re normally required to work away from your employer's place of business or in different places.
2. Under your contract of employment, you had to pay your own motor vehicle expenses. You aren’t considered to have paid your own motor vehicle expenses if your employer reimburses you or you refuse a reimbursement or reasonable allowance from your employer.
3. You didn’t receive a non-taxable allowance for motor vehicle expenses such as per-kilometre rate.
4. You have a copy of Form T2200, Declaration of Conditions of Employment, which has been completed and signed by your employer.

If you earn commission income, you can deduct vehicle expenses if you meet all of the employment conditions outlined in the Salaried employees and employees earning commission income section.

The type of expenses you can deduct are:

• fuel (such as gasoline, propane, and oil)
• maintenance and repairs
• insurance
• licence and registration fees
• capital cost allowance (CCA)
• interest you paid on a loan used to buy the motor vehicle and
• leasing costs

Note: If you bought or sold your car in the year and used it to earn employment income, you can’t deduct the cost of the car from your income. However, you can deduct a percentage of the vehicle’s cost. The part of the cost you can deduct or claim is called depreciation or capital cost allowance (CCA). Check out the CCA section below for more information.

Rebates, reimbursement, or an allowance -  If you received a reimbursement, rebate, or an allowance for any of your vehicle expenses that weren’t included in your employment income, you’ll need to report those amounts on the T777 page. Don’t include any amounts that were repayments related to leasing costs. Certain leasing costs can be deducted from your income using this chart. However, if you have repayments that are owed to you, you won’t be able to use this chart to calculate the leasing costs; instead you’ll need to contact the CRA.

Calculating the interest on your vehicle loan -  You can deduct interest you paid on money you borrowed to buy a motor vehicle or passenger vehicle you use to earn employment income.

If you use a passenger vehicle to earn employment income, there is a limit on the amount of interest you can deduct. It is the lower of the following:

• Total interest paid in the year
• $10* X the number of days for which interest was paid

 *Use $8.33 for passenger vehicles bought between December 31, 1996, and January 1, 2001.  In all other cases, use $10.

 

Home office expenses

You can deduct expenses you paid for the employment use of a work space in your home and you meet one of the following conditions:

• The work space is where you typically (more than 50% of the time) do your work.
• You use the work space only to earn your employment income. You also have to use it on a regular and continuous basis for meeting clients, customers, or other people to meet your employment duties.

If you’re a salaried employee, you must have paid these expenses under your contract of employment to be used directly in your work. You must also not have received reimbursement from your employer for these expenses. 

You can deduct the part of your costs that relates to your work space, such as the cost of electricity, heating, and maintenance. However, you can’t deduct mortgage interest, property taxes, home insurance, or capital cost allowance.

Note: If you’re on commission, you can deduct your property taxes and home insurance costs.

To calculate the percentage of home office expenses you can deduct, use a reasonable basis, such as the area of the work space divided by the total finished area (including hallways, bathrooms, kitchens, etc.). Enter the amount as a percentage (e.g. If you want to express 80%, enter 80 into the program).

If your office space is in a rented house or apartment where you live, deduct the percentage of the rent as well as any maintenance costs you paid that relate to the work space.

Keep in mind, the amount you can deduct for home office expenses is limited to the amount of employment income remaining after all other employment expenses have been deducted. This means that you can’t use home office expenses to create or increase a loss from employment.

You can carry forward any unused home office expenses and claim them in the following year, as long as you’re reporting income from the same employer. You can find the unused expenses’ amount on your previous year’s T777 form.

 

Capital cost allowance (CCA)

As a salaried employee or one that’s earning commission income, you can’t deduct the cost of a vehicle you used to earn income. However, you can claim a percentage of the vehicle’s cost known as depreciation or capital cost allowance (CCA).

 If you are an employed musician, you can claim CCA on a musical instrument if you had to provide the musical instrument as a condition of employment.

The amount of CCA you can claim for your depreciable property depends on the class that property belongs to and its CCA rate. Refer to the CRA website to find out which class your vehicle or musical instrument belongs to.

Keep in mind, you don’t have to claim the maximum amount of CCA in any given year. You can claim any amount you want, from zero up to the maximum allowed for the year.

Important: If you sell your vehicle during the year, depending on the class, you might not be able to claim CCA on it.

 

• Undepreciated capital cost balance at the start of the year – If you claimed CCA in any previous year, you’ll need to enter the undepreciated capital cost (UCC) of the property at the end of last year on the T777 page. UCC is the amount of the capital cost left for further depreciation at any given time. If you received a GST/HST rebate for a vehicle or musical instrument in 2016, you’ll need to reduce your opening UCC by the amount of the rebate.

• Total cost of any additions you made to this vehicle or musical instrument in 2016 – This is the amount you paid for the vehicle or musical instrument including any GST/HST or provincial sales tax and costs you paid to improve the vehicle or instrument.

• Amount you received for the vehicle or musical instrument if you disposed of it in 2016 – This is the lowest of the following amounts:
• Amount received for selling all assets minus any related expenses or
• Original cost of assets

Also, include any insurance proceeds for a property that was lost or destroyed that are more than the cost of the property.

 

How is my vehicle’s CCA calculated and where can I claim it?

CCA is calculated by grouping together depreciable property that you own into CRA classes of depreciable property. A specific CCA rate is then applied to each particular class. For more information on how your CCA amounts are calculated, check out the CRA website. To claim your CCA for the vehicle you used to earn employment income, follow these steps in H&R Block’s tax software:

1. On the PREPARE tab, click the LET’S TALK ABOUT 2016 icon.
   
   
2. Select the checkbox labelled I was employed, then click Continue. You will find yourself here:
   
   
   
   
3. Under the EXPENSES heading, select the checkbox labelled Employment expenses (T777) then click Continue. 
   
   
4. On the Employment expenses page, answer Yes to the question, Did you buy or sell a vehicle?. 
   
   
5. Return to the top of the page. Select CCA from the green Go To Page dropdown menu.
   
   
6. Enter your information into the tax software.
   
   

  

Artists’ employment expenses

If you earned employment income from an artistic activity, you can deduct expenses you paid if you did any of the following:

• composed a dramatic, musical, or literary work
• performed as an actor, dancer, singer, or musician in a dramatic or musical work
• performed in an artistic activity as a member of a professional artists' association that the Minister of Canadian Heritage has certified or
• created a painting, print, etching, drawing, sculpture, or similar work of art (reproduction of these is not considered an artistic activity)

These expenses include any GST and provincial sales tax (PST) or HST that you paid.

The amount you can claim is the lesser of:

• the expenses you actually paid in the year and
• the lesser of:
  • $1,000 and

• 20% of your employment income from artistic activities

minus the following amounts you deducted from your income from an artistic activity:

• musical instrument expenses
• interest for your motor vehicle and
• capital cost allowance for your motor vehicle

If you have expenses that you can’t claim this year because of the limit, you can deduct them from artistic income you earn in a future year. Also, you can deduct amounts you carried forward from previous years from your artistic income earned in 2016, as long as the total expenses are within the above limits for the year.

 

Employed musicians

If you’re an employed musician, your employer might require you to provide your own musical instrument. If this is the case, you can deduct the expenses you paid that relate to the musical instrument. 

Although you cannot deduct the actual cost of your musical instrument, the amounts you can deduct for your musical instrument are:

• maintenance costs
• rental fees
• insurance costs and
• capital cost allowance (if you own the instrument)

Employed tradespersons

You might be able to deduct the cost of eligible tools you bought in 2016 to earn employment income as a tradesperson. 

An eligible tool is a tool (including associated equipment such as a toolbox) that:

• you bought to use for your job as a tradesperson and was not used for any purpose before you bought it
• your employer certified that it was necessary as a condition of and for use in your job as a tradesperson and
• is not an electronic communication device (like a cell phone) or electronic data processing equipment (unless the device or equipment can be used only for the purpose of measuring, locating, or calculating)

Be sure to get a completed and signed T2200 form from your employer certifying that the tools being claimed were bought and provided by you as a condition of your employment as a tradesperson.

The maximum deduction you can claim for eligible tools is the lesser of $500 and the amount calculated by the following formula:

A − $1,161 where

A = the lesser of:

1. the total cost of eligible tools that you bought in 2016 and
2. your income from employment as a tradesperson for the year

plus the amount you received in 2016 under the Apprenticeship Incentive Grant and the Apprenticeship Completion Grant programs

minus the amount of any Apprenticeship Incentive Grant and Apprenticeship Completion Grant overpayments that you had to repay in 2016.

If you’re an employed apprentice mechanic, refer to CRA’s Employment Expenses’ guide for information on deducting the cost of eligible tools. If you’re situated in Québec, you can also refer to Revenu Québec’s guide, Employment Expenses.

 

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