5 – THE GST/HST REBATE & OTHER EMPLOYMENT TAX CREDITS

Claiming the GST/HST Rebate and Understanding Eligibility
🧾 Example of the Process for Claiming the GST/HST Rebate on the Tax Return
🧰 New for 2022: Overview of the Labour Mobility Tax Deduction for Tradespeople

Claiming the GST/HST Rebate and Understanding Eligibility

When employees pay for certain work-related expenses, they may be entitled to get back some of the Goods and Services Tax (GST) or Harmonized Sales Tax (HST) they paid on those purchases. This is known as the GST/HST Rebate for Employees, and it can result in extra money being refunded to your client (or to you, if you’re filing your own return).

Let’s break down what this rebate is, who qualifies for it, and how it’s claimed — all in simple terms.

1. What Is the GST/HST Rebate for Employees?

The GST/HST rebate is a refund that employees can claim for the portion of sales tax they paid on deductible employment expenses.

In simple terms:

If you can claim an expense as an employment deduction, and that expense included GST or HST, the CRA may give you back that tax portion through a rebate.

For example, if an employee buys office supplies or pays for vehicle expenses to earn employment income — and those expenses included GST or HST — the employee can claim back the tax they paid.

2. Who Is Eligible for the GST/HST Rebate?

Not every employee can claim this rebate. There are a few specific conditions that must be met:

✅ You must be required to pay employment expenses – Your employer must have completed and signed Form T2200 (Declaration of Conditions of Employment) confirming that you had to pay those expenses to do your job.

✅ You must have paid GST/HST on those expenses – The rebate only applies to costs that included sales tax (for example, office supplies, utilities, or vehicle fuel).

✅ Your employer must be a GST/HST registrant – This means your employer charges and remits GST or HST to the CRA.

Most businesses in Canada are registrants.
However, financial institutions (like banks and insurance companies) are not eligible. If you work for a financial institution, you cannot claim this rebate.

✅ You must be an employee or a partner in a partnership – Self-employed individuals claim GST/HST differently, so this specific rebate applies only to employees or partners who incur employment-related expenses.

3. How the Rebate Works

When you qualify, the CRA will refund you the portion of GST or HST included in your deductible employment expenses.

You don’t need to manually go through every receipt to calculate how much GST or HST was paid — the CRA provides a standard calculation process through Form GST370 (Employee and Partner GST/HST Rebate Application).

Here’s how it works conceptually:

You list your total deductible employment expenses on Form T777 (Statement of Employment Expenses).
You then complete Form GST370, which automatically determines the rebate amount based on your total expenses.
The rebate is processed along with your personal income tax return.

4. Important Note: The Rebate Becomes Taxable Next Year

A key point that often surprises new tax preparers is that the GST/HST rebate is taxable income — but not in the same year you claim it.

Here’s how it works:

If you claim the rebate on your 2024 tax return,
The rebate amount must be included as employment income on your 2025 tax return.

Why? Because the CRA treats the rebate as a recovery of expenses that were deducted in the previous year.

5. Do You Need to Send Receipts to the CRA?

No, you do not need to send receipts when you file your return. However:

You must keep all receipts and supporting documents (like your T2200) in case the CRA requests them later.
The CRA often reviews employment expense claims through post-assessment audits, sometimes up to two years later.

Always remind clients to store their receipts safely — either in physical form or scanned copies.

6. Step-by-Step Summary

Step	Action	Form Used	Who Completes It
1	Confirm the employee is required to pay work expenses	T2200	Employer
2	List deductible employment expenses	T777	Employee / Preparer
3	Apply for the GST/HST rebate	GST370	Employee / Preparer
4	Include rebate as income next year	Report on next year’s T1	Employee / Preparer

7. Common Example

Let’s say Emma works for a marketing agency (which is a GST/HST registrant).
Her employer requires her to work from home three days a week, and she pays for part of her internet and electricity.

Emma can claim part of those home expenses on her T777 as employment deductions.
Since those expenses included HST, she can also file Form GST370 to claim the rebate.
The amount refunded will appear as a credit on her tax return, and next year she’ll report it as income.

8. Key Takeaways

Concept	Explanation
Purpose	Refunds the GST/HST paid on deductible employment expenses
Eligibility	Must work for a GST/HST-registered employer and pay work-related expenses
Form Used	GST370
Rebate Is Taxable	Must be included in income the following tax year
Recordkeeping	Keep T2200, receipts, and calculations for CRA review

💡 Final Tip

The GST/HST rebate might seem like a small detail, but it can make a noticeable difference on a tax return — especially for clients with significant home office or vehicle expenses.

As a new tax preparer, focus on:

Recognizing when a client’s employer is GST/HST-registered,
Identifying expenses that included GST/HST, and
Ensuring the rebate is correctly reported in both years.

This careful attention helps you prepare accurate, compliant returns — and builds trust with your future clients.

🧾 Example of the Process for Claiming the GST/HST Rebate on the Tax Return

When employees incur expenses that are directly related to earning their income—such as vehicle expenses, home office costs, or supplies—they may be able to deduct these costs on their tax return using Form T777, Statement of Employment Expenses.

In many cases, these expenses include GST or HST. Since employees are not registered businesses, they cannot normally claim input tax credits like businesses do. However, the Canada Revenue Agency (CRA) allows eligible employees to claim back a portion of the GST/HST they paid on their employment expenses through a GST/HST rebate.

Let’s walk through how this process works in practice.

1. Determine if the Employee Is Eligible for the GST/HST Rebate

Before claiming any rebate, confirm that the employee qualifies.
An employee may be eligible if:

They were required to pay for certain expenses to perform their job duties, and
Their employer did not fully reimburse them for those expenses, and
Their employer is a GST/HST registrant, meaning the employer charges GST/HST on its goods or services.

If these conditions apply, the employee can usually claim a GST/HST rebate for the tax included in their deductible expenses.

2. Identify Which Expenses Are Eligible

Not all employment expenses qualify for the rebate. The key is whether GST or HST was actually charged on the purchase.

✅ Common eligible expenses include:

Office supplies (paper, pens, postage, stationery)
Cell phone or internet charges (the portion used for work)
Parking fees
Vehicle expenses such as gas, maintenance, repairs, or lease payments

❌ Non-eligible expenses include:

Insurance premiums (no GST/HST is charged on insurance)
Salaries or wages paid to assistants
Certain license or registration fees that don’t include GST/HST

Each expense category must be considered separately—only the portion subject to GST/HST qualifies for the rebate.

3. Record the Expenses on Form T777

On Form T777 – Statement of Employment Expenses, the total expenses are entered including GST/HST.
There’s no need to separate the tax portion.

For provinces that charge HST (like Ontario, Nova Scotia, New Brunswick, Newfoundland and Labrador, and Prince Edward Island), you would record the expenses in the HST column.

For provinces that only charge GST (like Alberta or British Columbia), you would record them in the GST column.

This step ensures that when you later complete the GST/HST rebate form, the correct tax rate is applied automatically.

4. Complete Form GST370 – Employee and Partner GST/HST Rebate Application

To actually claim the rebate, employees must complete Form GST370.
This form is used to calculate the portion of GST/HST included in their deductible expenses that can be refunded.

You’ll need to provide:

The business number of the employer
The total employment expenses from the T777 that included GST/HST
The calculation of the rebate amount (the CRA form automatically determines this once totals are entered)

The rebate amount from Form GST370 is then transferred to the employee’s main tax return.

5. Report the Rebate on the Tax Return

The rebate is entered on line 45700 of the T1 General Return as a refundable credit.
This means it directly increases the taxpayer’s refund or reduces any balance owing.

For example, if the calculated rebate is $693, that full amount is added to the refund total on line 45700.

6. Include the Rebate as Income in the Following Year

This part often surprises new preparers: the GST/HST rebate claimed this year must be reported as income next year.

Here’s why:
When you deduct employment expenses this year, you include the full amount, including GST/HST.
Then, when you later receive the rebate, the CRA requires you to add that rebate back into income the following year to avoid “double-counting” the deduction.

On the next year’s tax return, this amount is entered on line 10400 – Other Employment Income.

7. Example Scenario

Let’s say Amanda, an employee in Ontario, paid for work-related expenses such as office supplies, parking, and cell phone bills.
She records the total expenses (including HST) on her T777 and qualifies for the GST/HST rebate.

After completing Form GST370, she receives a rebate of $693, which appears on line 45700 of her tax return.
Next year, Amanda must include that $693 as income on line 10400 of her new tax return.

This process repeats each year—claim the rebate for the current year’s expenses, and report the prior year’s rebate as income.

🔍 Key Takeaways

The GST/HST rebate is for employees who pay work-related expenses that include GST/HST and are not fully reimbursed.
Record expenses including GST/HST on Form T777.
File Form GST370 to calculate and claim the rebate.
The rebate appears as a refundable credit on line 45700.
The next year, that rebate must be added back as income on line 10400.

This process may look detailed at first, but once you understand the flow—T777 → GST370 → line 45700 → carry to next year’s income—it becomes straightforward.
It’s an essential part of employment expense claims for Canadian taxpayers, and a concept every aspiring tax preparer should master early on.

🧰 New for 2022: Overview of the Labour Mobility Tax Deduction for Tradespeople

Beginning with the 2022 tax year, the Canadian government introduced a new deduction called the Labour Mobility Deduction for Tradespeople.

This deduction was created to support construction and trade workers who must temporarily relocate to work on projects outside their usual area. It helps offset some of the out-of-pocket costs for travel, lodging, and meals when they are temporarily required to work away from home.

🔍 Why This Deduction Was Introduced

In many skilled trades, workers often travel to different cities or regions to complete short-term projects. For example:

A carpenter who normally lives and works in Toronto may need to work on a job site in Sudbury for two weeks.
A welder based in Windsor might temporarily take a project in Timmins for a few months.

Before 2022, these temporary relocation expenses were not deductible because they didn’t qualify under regular moving expenses (which only apply when you move permanently to start a new job or school).

To address this gap, the government introduced this labour mobility deduction, allowing eligible workers to deduct up to $4,000 per year in certain costs related to these temporary work assignments.

💡 Key Benefit: It’s a Deduction, Not a Credit

Unlike a tax credit, which provides a fixed percentage back, this measure is a tax deduction.

That means the expenses directly reduce taxable income, providing savings based on the individual’s marginal tax rate.
For example:

If a worker’s marginal tax rate is 30%, a $4,000 deduction can save about $1,200 in taxes.

🏠 What Expenses Are Eligible?

Tradespeople can claim certain costs related to temporary lodging and travel. Eligible expenses include:

✅ Temporary lodging

Hotel, motel, or short-term rental costs while at the temporary work location

✅ Transportation for one round trip

Travel costs to and from the temporary work location (for example, travel from Toronto to Sudbury and back)

✅ Meals during the trip

Meals consumed during the travel to and from the temporary location

Important: Meals and other personal costs while staying at the temporary work site are not eligible.

📍 What Makes a Location “Eligible”?

For a work site to qualify as an eligible temporary location, the following conditions must be met:

Distance Test:
- The temporary work location must be at least 150 kilometres closer to the job site than the individual’s ordinary residence.
- If it’s within 150 km, the CRA assumes the worker could reasonably commute, so the deduction isn’t allowed.
Duration Test:
- The worker must be away for at least 36 hours.
- This ensures that very short trips or single-day assignments don’t qualify.
Location Test:
- The temporary work site must be in Canada.

💰 Deduction Limits and Conditions

The maximum annual deduction is $4,000 per year.
The deduction for each temporary job site cannot exceed 50% of the income earned from that work location.

For example:

If a worker earns $1,500 for a short project, the maximum deduction they can claim for that job is $750 (50% of $1,500).
To claim the full $4,000, the worker must have earned $8,000 or more at the temporary location.

This limit ensures that deductions remain proportionate to the income earned from each site.

⚖️ Other Important Conditions

The worker must maintain a permanent residence where they normally live (for themselves or their family).
The temporary accommodation must truly be temporary—it cannot replace their primary home.
The worker cannot be reimbursed for the expenses by their employer, unless that reimbursement is included in their taxable income.
The worker cannot double-claim expenses:
- You can either claim under this labour mobility deduction or as moving expenses—not both.
- You also cannot claim the same expenses on Form T777 (Statement of Employment Expenses) if they are used here.

🔄 Carrying Forward the Deduction

If not all eligible expenses can be used in one tax year, the CRA allows the remaining portion to be claimed in the following year, similar to how moving expenses can be carried forward.

However, the deduction can only be applied over two tax years.

⚠️ Avoiding Double Counting

Because many tradespeople also claim employment expenses (with a T2200 form from their employer), it’s important to separate expenses:

Use Form T777 for regular employment expenses.
Use the Labour Mobility Deduction specifically for temporary travel and lodging costs.

Mixing or reusing the same receipts under both categories can lead to CRA disallowing part of the claim.

🧮 Example Scenario

Let’s take John, an electrician from Toronto, who temporarily works in Sudbury for two weeks.

He rents a motel for 10 nights at $150/night → $1,500
He spends $250 on fuel and meals for his round trip.
His total eligible expenses: $1,750
John earned $3,500 for the work in Sudbury.

He can deduct 50% of $3,500 = $1,750, so the full amount of his eligible costs qualifies.
This deduction will reduce his taxable income by $1,750, lowering his total taxes payable.

🧾 Summary of Key Points

Rule / Condition	Requirement
Maximum deduction	$4,000 per year
Location distance	At least 150 km from ordinary residence
Minimum duration	36 hours away from home
Income limit	Up to 50% of income from that job site
Type of expense	Temporary lodging, one round-trip travel, and travel meals
Ineligible expenses	Meals/lodging while at site, insurance, reimbursed costs
Carry-forward	Can spread claim over two years
Cannot combine with	Moving expenses or T777 claims for same costs

🧩 In Summary

The Labour Mobility Deduction for Tradespeople provides real tax relief to workers who must travel temporarily for work. It recognizes that these short-term assignments can be costly and ensures that out-of-pocket expenses are fairly deducted from taxable income.

For tax preparers, the key is to:

Verify eligibility (distance, duration, income limit),
Separate this deduction from other expense claims, and
Keep clear records of receipts and travel details.

This deduction is an excellent example of how Canada’s tax system continues to adapt to the realities of modern work in the trades sector.