AFM 206

Employment deductions
and autos for employment

Module B
Week 3 Lecture
Topics: Employment deductions and autos for employment 2

§ Employment deductions and form T777

§ Use of an automobile for work

§ Employer owns or leases the vehicle and makes it available to the employee
§ Employer requires the employee to use his or her own vehicle for employment travel

§ Home office deductions

§ A few more
Refresher: How do we calculate employment income?

Income Tax Act Practical: reporting

Inclusions: Salary, wages, and other § Employer responsible for computing
section 5 remuneration (e.g., tips, bonuses)
received in the calendar year employment income and issuing a
Inclusions: + Other employment income
T4
section 6 items (e.g., taxable benefits)
§ Not all items included on the T4 slip
Inclusions: + Stock option benefits
section 7 § For example, most deductions are not
Deductions: - Specific deductions allowed tracked by employers, but provide the
section 8 T2200 to demonstrate eligibility
Part I, Div. B Employment Income
 VIDEO 3(1)
Employment deductions – general
Expenses incurred in earning Employment Income
§ Generally, expenses employees incur to do their jobs are not deductible

§ For example, a suit to work in public accounting

§ Assumed to be personal or part of living expenses and cannot be used to reduce employment
income

§ Very few expenses are deductible – must be specifically mentioned in ITA or CRA
documents
§ Everyone wants to claim some! But they can’t just because they want to

§ Shown on Line 22900 of Form T1 (part of Step 3- the calculation of Net Income)
Any employee can claim… 6

§ Registered pension plan (RPP) deduction (if you have joined your employer’s plan
and are making contributions)
§ line 20700
§ RPP is different from an RRSP

§ Annual union, professional or like dues (if you are paying eligible dues)
§ CPA fees, lawyer, doctor, nurse, engineer, etc. Each of these amounts must be
§ if you must pay union dues or similar related to the taxpayer’s duties
§ line 21200

Key concept #4: Income is a net concept

Only a few employees can claim… 7

§ If an employee has a completed Form T2200 ‘Declaration of Conditions of

Employment’ signed by their employer, then a taxpayer can complete Form T777
and claim a much longer list of employment expenses
§ Employee may also be able to claim a GST/HST Employee must be REQUIRED
(Goods and Services Tax/Harmonized Sales Tax) TO PAY THEIR OWN
rebate on those expenses (discussed in Module D) EXPENSES
using Form GST370 while carrying out duties of
employment
Form T777- a look at what can be deducted

Up next

Coming up!
 VIDEO 3(2)
Automobiles used for employment – taxable benefit
Automobile benefits: 2 categories based on ownership 10

1. An employee may use an employer’s vehicle for purposes other than business,
the personal use is a taxable benefit for the employee
Calculation varies
§ A standby charge for the year applies, plus based on whether
§ An operating expense for the year applies employer owns or
leases the car
CRA provides an online calculator: https://www.canada.ca/en/revenue-agency/
services/e-services/e-services-businesses/automobile-benefits-online-calculator-disclaimer.html

2. An employee may use his or her own vehicle to carry out his or her
employment duties and get a payment from the employer for the business use of that
vehicle. The payment MAY be a taxable benefit
The payments are taxable unless they are
based on a reasonable per-km rate
Section 6: automobiles – employer owned/leased 11

If an employee uses an employer’s car for personal purposes, this is a taxable benefit
Benefit = standby charge + operating cost benefit Key concept #1:
Tax laws appear
§ Standby charge: benefit of the use of the vehicle
arbitrary but guided
§ Employer owned: 2% x # of months used x cost of vehicle by economics and
§ Employer leased: 2/3 x # of months used x monthly leasing cost
social goals

§ Operating cost benefit: benefit of not having to pay the operating costs
§ $0.29/km for all personal use km

§ Potentially reduced amounts if used >50% in employment

Section 6: automobiles – employee owned/leased 12

§ If the employer pays the employee to drive their own car for employment, this
MAY be a taxable benefit – depends on the nature of the payment
§ If payment is an allowance or a flat amount…
Key concept #3: There is
§ Generally, it is a benefit constant tension between
§ Can deduct portion of costs
the gov’t and taxpayers

§ If payment is reasonable (prescribed maximum) and is a “per km” amount based

on use in employment…
§ Is not a benefit (viewed as a reimbursement)
§ Cannot deduct any costs
Use of an Automobile For Employment Purposes
Owned Leased

Employer owned/leased Standby: 2% x 12 x cost Standby: 2/3 x lease

OCB: #km x 0.29 OCB: #km x 0.29

Employee owned/leased Include allowance Include allowance

- fixed allowance Ded’n for CCA & costs Ded’n for lease & costs

Employee owned/leased No tax implication No tax implication

- per km reimbursement

Discussed next
 VIDEO 3(3)
Employment deductions – automobile
Employment expenses: use of vehicle 15

§ If

§ an employer requires the employee to use a car for employment purposes and

§ they provide the employee with a signed Form T2200

§ then,

§ the employee can claim certain vehicle expenses

§ related to employment driving only

§ Driving to the employee’s normal work location from home is not employment use
of the vehicle
Allowable motor vehicle expenses- Form T777…
Need to keep
a detailed log
of km and
expenses

Next slide

‘Chapters’ refer to
Guide T4044
Quick intro to Capital Cost Allowance (’CCA’)
§ CCA = tax depreciation

§ Claim part of the cost of the employee’s vehicle used for employment purposes
(generally 30% on a declining balance basis)
§ First year currently has higher amount (typically 1.5 times except some zero
emission vehicles, ZEV, that get 100% in year 1)
§ Lots of info on how this works in Guide T4044, Employment Expenses

§ Calculation on Form T777 done by tax software once you determine which CCA
‘class’ the vehicle (or office equipment) goes into
§ Very complex rules! You will learn all about CCA calculations
in future tax courses when you learn
about rental or business income
 VIDEO 3(4)
Employment deductions – Other topics
Employment expenses: use of home office 19

§ If your employer requires the you to use your home office for employment
purposes (i.e., they don’t have an office available for you to use) and they provide
you with a signed Form T2200,
§ Then, you can claim certain home office expenses related to employment use only

§ All employees: utilities (electricity, heat, water), maintenance, supplies

§ Commission employees (salespeople): above, plus home insurance and property

tax Key concept #5:
§ Simplification for COVID years “Income” is different
from capital
Workspace in home expenses – Form T777… 20

Home office expense are

limited and have a 1
year carryforward!
Employment expenses and type of employee – an overview
Student-prepared Employees who are
‘required to travel’
are a special subset

Ch 3 of guide is rules for

Salaried employees

Ch 2 of Guide T4044 is
rules for commission
employees
Claiming these employment expenses 22

§ So tricky that employers often put out guidelines on when they will and when they
won’t sign Form T2200
§ In 2022, as in 2020 and 2021, due to COVID, likely many more times when clients
WILL be able to claim these expenses - will be common in your first tax season!!

§ Remember: every single employee would want to deduct expenses for their “home
office” or car if they could! (reducing their tax liability) and CRA doesn’t want that
(it would reduce their tax revenue!)
Claiming home office expenses – COVID 23

§ Employees were given a choice and the qualifying period to claim home office
expenses was reduced to four consecutive weeks
§ Simple method: $2/day for each day worked at home in the period, plus any other
days worked from home in 2020 due to COVID-19, up to max of $400, $500 in
2021 and 2022
§ Simple method: employees NOT required to get Form T2200 signed by their
employer
CRA issued calculator to help
taxpayers decide which
method better