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Tax Deductions for Salary or Commission Employees

Most employees cannot deduct expenses on their tax return however there are some instances when employees can claim a deduction.

The rules are less stringent if an element of the employee’s compensation includes commission.

Salary employees

There are limited expenses you can deduct: accounting and legal fees, motor
vehicle expenses, traveling expenses, parking, supplies, salary expenses, office rent, and home-workspace expenses. To deduct most of these expenses, your employer will have to complete a T2200 form which certifies that you had to incur these expenses as a condition of your employment. The following CRA article discusses deduction of employment expenses.

Commission employees

In addition to the expenses salaried employees can claim, commissioned employees can also deduct costs such as salaries to an assistant, training costs, licenses, supplies, and food and beverages. Again, a T2200 form must be completed by your employer. A list of expenses that are eligible for deduction by commissioned employees are outlined via the following link.

Travel costs not deductible

Regardless of your status as a salaried or commissioned employee, it’s not permissible to deduct travel costs from your residence to your workplace. Most of the expenses for tools and clothing are also not deductible.

Keeping records

It’s necessary to keep verifiable records for each expense that you claim, for each year in which you claim it. Don’t send in your records or receipts with your return, but rather keep your records and receipts together with your tax return files. If you cannot produce sufficient records, the CRA may reduce your claim.

Generally, you have to keep your records (whether paper or electronic) for at least six years from the end of the tax year to which they apply. For more information, see the CRA article on keeping records.

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