In Canada, employment tax deductions refer to the various tax incentives and benefits the government offers employers to encourage job creation and economic growth.
These deductions can vary by province, territory, business, and employment type. Want to discover all about tax deductions you can claim as a salaried worker? Let's find out the tax deductions for employees in Canada!
Having a business? Here, you can discover the most common tax deductions for businesses in Canada.
Tax deduction for Employees earning a salary
Below are the main tax deductions for salaried employees in Canada. This information is based on the employment expenses established on the official website of the Government of Canada, so we recommend you refer to it if you need further clarification or download a form such as the T777 to declare your employment expenses.
Use it to calculate your total employment expenses, then record the amount on line 22900 of your income tax and benefit statement.
All deductible employment expenses include any goods and services tax (GST), provincial sales tax (PST), or harmonized sales tax (HST), so you can get a refund of the GST/HST you paid.
Are you self-employed in Canada? Discover everything about taxes as a gig worker!
1. Costs associated with accounting services
These refer to the costs associated with hiring accounting and legal services that may be tax deductible in Canada, such as the payment of services rendered to public accountants, auditors, and lawyers, as well as expenses related to tax preparation, accounting, auditing, and legal advice.
Please check the tax regulations of your province, as these deductions may be subject to certain limits and restrictions.
Would you like to learn about tax credits in Canada? Find more here!
2. Eligible motor vehicle expenses
Employees or business owners in Canada may deduct expenses associated with using vehicles for business or professional activities. However, they must meet the following conditions:
- You were required to work away from your employer's place of business.
- You had to pay your motor vehicle expenses without being reimbursed.
- You have not received a non-taxable allowance for motor vehicle expenses.
More information is available here: "Interpretation Bulletin IT-522R Archived—Vehicle, Travel, and Sales Expenses of Employees."
3. Travel-related expenses
Travel expenses in Canada refer to all costs related to travel for business or professional purposes, including food, beverages, accommodation, and transportation and under these conditions:
- You worked away from your employer's place of business or at different locations.
- You had to self-pay travel expenses.
- You did not receive a non-taxable allowance for travel expenses.
- If your employer requires you to be absent for at least 12 consecutive hours from where you usually work, you may deduct up to 50% of your food and beverage expenses.
We recommend you check the criteria established by the Canada Revenue Agency (CRA) and Interpretative Bulletin IT-522R Presented - Employee Vehicle, Travel, and Sales Expenses to review which expenses may be tax deductible.
For your information, these deductible transportation expenses are declared under "Other Expenses" on Form T777, Statement of Employment Expenses.
4. Parking expenses
Deductible parking expenses generally refer to parking-related costs due to business or work activities, which can be deducted from your taxes. These expenses must be reported on the "Parking" line of Form T777, and they may include:
- Business parking: Any parking fees you may pay while conducting meetings with clients or customers, for example, while attending conferences or seminars, are deductible parking expenses.
- Parking for work purposes: Parking expenses that occur while commuting to your place of work may also be deductible; however, certain conditions must be met. It is advisable to review the CRA guidelines for accurate information.
5. Deducible supplies
Deductible employee supplies are those that an employee purchases for use on the job and is not reimbursed by the employer. Examples include office supplies (paper, pens, folders, etc.), specific tools and equipment to perform your job (for example, specialized software for a designer), or uniforms and work clothes.
However, supplies may only be deductible if:
- You had to provide and pay for the supplies.
- You used the supplies directly in your work.
- Your employer has not reimbursed you for these expenses.
Visit Interpretive Bulletin IT-352R2 Filed - Employee Expenses, Including Home Workspace Expenses, and check eligible supplies under "Home Office Expenses for Employees."
You can also deduct the expenses you paid for long-distance telephone calls. You can also deduct a basic cell phone plan designated for your work and professional activities.
6. Salary Expenses
If you pay a salary to a substitute or assistant to perform specific tasks, you may deduct that salary as a business or professional expense. When calculating your taxes, the amount paid to the substitute or assistant may be subtracted from your total income.
However, visit the Canada Pension Plan (CPP) and Employment Insurance (EI) Resolutions or read RC4110 Guidance, which involves self-employed individuals, because as an employer, you can also deduct as an expense your share of CPP or QPP (The Québec Pension Plan) contributions and EI and PPIP (Provincial Parental Insurance Plan).
For more information, go to Completing Bulletins and Summaries, read RC4120, Employer's Guide—Completing the T4 Bulletin and Summary, and check the Working Conditions Statement.
7. Office Rental Deduction
The office rental deduction refers to the deductibility of expenses related to renting space for business purposes. This deduction allows Canadian taxpayers to deduct their taxable income for the rent paid. However, the following conditions must be met:
- Due to your employment contract, you have had to rent an office and pay expenses.
- Your employer has not reimbursed you for these expenses.
We recommend keeping an itemized record of your office rent payments and contract to justify the deduction claimed on your income tax return. Also, visit the CRA to learn more about the limits or restrictions imposed on the amount that can be claimed, and check Form T2125 (Statement of Business or Professional Activities).
8. Deducible Excess employees profit-sharing plan (EPSP)
Excess employee profit-sharing Plan (EPSP) refers to an allowable deduction for employers who contribute to an employee profit-sharing plan (EPSP) that exceeds the limits the CRA allows. These are established to ensure that contributions are reasonable and aligned with the government's fiscal objectives.
Because the tax rules and regulations related to EPSP plans and their deductions are complex, we recommend you consult a tax advisor or tax expert for guidance.
9. Home Office Expenses
Deductible home office expenses are expenses related to using a portion of your home to carry out work or business activities. However, within the conditions to deduct them, your workspace must be used primarily more than 50% of the time, and you had to pay for them all along without being reimbursed.
You can deduct the portion of your expenses related to your workspace, such as electricity, heating, and maintenance. However, you cannot deduct mortgage interest, property taxes, homeowner's insurance, or capital expense allowance.
Visit Form T2200, Statement of Working Conditions and Interpretation Bulletin filed IT-352R2 Filed - Employee Expenses, Including Home Workspace Expenses.
Tips for Tax Deductions in Canada
We recommend keeping a record of your expenses, receipts, invoices, canceled checks, travel stubs related to work or professional activities, and credit card statements for each year you claim expenses.
Whether your records are in paper or electronic format, keep them for at least six years from the end of the fiscal year to which they pertain. If you want to destroy your records before this period, seek written permission from the director of your tax services office and check Form T137, Request for Destruction of Records.
If you need help understanding common employee tax deductions, contact a tax professional or accountant specializing in employer payroll withholding. As an employee, ensure you are as informed as possible about how this money is used to pay taxes and benefits such as health insurance or Canadian Pension Plan contributions. Also, it's crucial to be aware of tax deadlines in Canada!
With Superprof's online platform, you'll find good accountants across Canada to help you understand everything related to accounting, from tax liabilities to tax credits and tax deductions for employee benefits. Learn all about accounting and tax liabilities and deductions and take proactive steps to manage them with the best accounting professionals in the country - find the best experts offering accounting classes near you with Superprof!
Wrap up!
Are you a salaried worker who wants to know all about employment tax deductions? In Canada, salaried workers have access to a wide range of tax deductions, ranging from costs associated with bookkeeping to vehicle and travel expenses, office supplies, and profit-sharing plans, among many others.
These deductions vary by province and type of employment and are subject to specific deductibility criteria established by the Canada Revenue Agency (CRA). We recommend that you become well-informed about the eligibility requirements established by the CRA in your province.
Because the tax system in Canada is often a bit complex, consult with tax experts to learn about all the deduction opportunities according to your job and your province. With proper management and advice, you can ensure compliance with tax regulations, take advantage of tax benefits, and confidently tackle adult life's challenges. Navigate the tax season stress-free!
Did you like this article? Leave a rating!
Loading...
