Taxation 1 – Lecture 2

Week 2

 Deductions from Employment Income

o Major items that my be deducted
 Professional and union dues [8(1)(i)]
 Cost of supplies consumed [8(1)(i)]
 Annual dues paid to trade union [8(1)(i)]
 Cellphone plan[8(1)(i)]
 RPP contributions [8(1)(m)]
 Office space or workplace-in-home [8(13)]
 Legal expenses –to collect or establish right to salary [8(1)(b)]
 Interest & CCA –only on motor vehicles and aircraft [8(1)(j)]
 Home office expenses
o Place where employee principally performs duties of employment (more than 50% of the
time), OR
o Space used exclusively for employment AND used on a regular and continuous basis for
meeting clients or other persons in the ordinary course of employment
o Utilities [8(1)(i)]
o Maintenance [8(1)(i)]
o Rent [8(1)(i)]
o Salesperson [8(1)(f)]
 House insurance and property tax
 Included in expenses subject to limitation
o Employees cannot deduct mortgage interest as a work space in the home expense
 Deductions for EI
o Expenses incurred by employees earning commissions from selling or negotiating
contracts [8(1)(f)]
o LIMIT -Deduction cannot exceed commissions
o Deduction is not available if the employee receives a reasonable travel allowance
o Items NOT limited to commission: CCA on an automobile and automobile financing
costs
o Capital expenses, membership fees or dues in a club and payments for the use of a yacht,
camp, lodge or golf course are specifically NOT deductible [18(1)(l)]
o Meals and entertainment –50% [67.1]
 Travelling expenses (including car) [8(1)(h), 8(1)(h.1)] )(NOT JUST FOR SALESPERSON)
o Deduction is not available if the employee receives a reasonable allowance for travel or
motor vehicle expenses
o Deduction is not available if a deduction is claimed under 8(1)(f) (see above)
o Meals–must be outside metropolitan area for at least 12 hours to deduct meals as travel
expense [8(4)]
 Travel Expenses
o Limitations to Cars
 Maximum cost -$30,000 plus tax [13(7)(g), Reg 7307]
 Interest –Monthly maximum -$300 [67.2]
 Lease –Monthly maximum -$800 plus tax [67.3] (see next
 Lease Limitations
o Refer to slide 16
 Employment Income and the GST/HST
o Employer must include the value of the GST/HST when calculating the value of taxable
benefits
o Employee GST/HST rebate
 Applicable when employee incurs expenses as part of employment contract
 Employees are not registered for GST/HST so they are not eligible to claim
credits
 Therefore, employees incurring deductible expenses can claim a GST/HST rebate
on those expenses
 Refund is taxable when received
