In a May 26, 2016 Technical Interpretation, CRA summarized the conditions that must be met in order for an individual that earns employment income to deduct employment expenses. Deductible expenses are limited to only a select group described in the Income Tax Act.
Generally, an employee may deduct costs of employment related expenses if:
- under the contract of employment, the employee had to provide and pay for the expenses;
- the employee does not receive a non-taxable allowance for the expenses;
- the employer does not, or will not, repay the employee for the expenses; and
- the employee keeps with his/her records a completed and signed copy of the appropriate form(s) (i.e. Form T2200, Declaration of Conditions of Employment, or Form TL2, Claim for Meals and Lodging Expenses).
Additional conditions must be met to deduct certain types of expenses (such as, for example, travel). For more information on employment related expenses, see www.cra.gc.ca/employmentexpenses, Chapters 3 and 4 of Guide T4044, Employment Expenses 2015.
Action Item: Employers-ensure that Form T2200 is properly completed and distributed or employees may be denied employment expense claims. Employees-obtain Form T2200 from your employer as early as possible.