Table of Contents
- Employment Expenses – T2200 & T777 💼🧾
- Issues With the T2200 and Common Mistakes Made 📄⚠️
- Doing a Critical Overview of the T2200 Before Claiming Expenses 🔍📄
- 🚗 Vehicle Expenses When an Employee Is Allowed a Deduction (T2200 + T777 Guide)
- 🚫 Example of a T2200 Where No Employment Expenses Are Allowed (Beginner-Friendly Guide)
- 🧾 Commissioned Salespeople: Special Rules & Additional Deductible Expenses (T2200 & T777 Guide)
- 🧩 Dealing With Specific Employment Expenses (CCA, Vehicle, Home Office & More)
- 🧾 GST/HST Rebates for Employment Expenses: The Ultimate Beginner-Friendly Guide
Employment Expenses – T2200 & T777 💼🧾
Claiming employment expenses is one of the most misunderstood areas of Canadian personal tax. Many taxpayers—and even some preparers—incorrectly assume that having job-related costs automatically qualifies them for deductions. This is not true.
The CRA audits this area heavily, so as a tax preparer, you must follow the rules precisely.
This section will guide you through EVERYTHING you need to know to prepare these claims safely and correctly.
🔑 What Are Employment Expenses?
Employment expenses are costs an employee pays out-of-pocket because their employer requires them to do their job, and the employer does not fully reimburse them.
These expenses are claimed on Form T777 – Statement of Employment Expenses.
But a taxpayer can ONLY claim these if their employer completes the T2200 – Declaration of Conditions of Employment.
📝 Understanding Form T2200 (THE GATEKEEPER)
Think of the T2200 as the permission slip that allows a taxpayer to claim employment expenses.
📌 Key Purpose of T2200
The T2200 certifies that the employee was:
- Required to pay specific employment expenses as a condition of employment
- Not fully reimbursed for those expenses
- Required to maintain a workspace, travel, buy supplies, etc., depending on the job
👉 Without a properly completed and signed T2200, the CRA will deny the employment expense claim.
📘 What the T2200 is NOT
❌ It is NOT:
- A claim form
- A guarantee the CRA will approve the deductions
- Proof of the amount spent
✔️ It only confirms the conditions of employment, not the costs.
🔍 How to Review a T2200 Like a Pro
When a client hands you a T2200, check these items carefully:
1️⃣ Does it clearly state the employee must pay the expenses?
Look for “YES” under the required conditions.
If employer selects “NO” → no claim allowed.
2️⃣ Does it specify the correct type of expenses?
There are several categories:
- Vehicle expenses 🚗
- Workspace in home 🏠
- Supplies 📦
- Cell phone & communication (if applicable) 📱
- Special clothing ⚒️
- Salesperson expenses 🤝
Each category enables different deductions.
3️⃣ Is the employee reimbursed?
⚠️ If employer reimburses the employee (and does NOT include reimbursement in income), the expense cannot be claimed.
4️⃣ Signed & dated?
No signature = invalid = CRA will deny.
📌 Note Box – CRA Audit Alert 🚨
CRA frequently reviews T2200-based claims.
Even small deductions ($2,000–$3,000) can trigger a review.Make sure your client’s form is complete, accurate, and matches their T777 claim.
🧮 Understanding Form T777 – Claiming the Expenses
Once a valid T2200 is completed, the employee uses T777 to calculate the deductible amounts.
📂 Common Categories of Claimable Employment Expenses
🚗 1. Motor Vehicle Expenses
Employees required to use their personal vehicle for work may deduct:
- Gas
- Insurance
- Repairs & maintenance
- Leasing costs
- Depreciation (CCA)
- Parking fees
❗ NOT claimable: commuting between home and office.
Only work-related travel qualifies.
👉 Mileage logbook is critical.
🏠 2. Workspace-in-Home Expenses
Allowed only when:
- Workspace is the employee’s principal work location OR
- Employee uses it regularly to meet clients
Possible deductions:
- Utilities 💡
- Rent 🏠
- Internet (employment portion only) 🌐
- Maintenance 🛠️
❌ Cannot claim
- Mortgage payments
- Capital expenses
- Furniture purchase
📦 3. Supplies
Examples of deductible supplies:
- Stationery
- Postage
- Professional tools
- Cleaning materials (if required)
📱 4. Cell Phone & Internet
Only the employment-use percentage is deductible.
CRA expects a reasonable calculation (e.g., call logs or usage charts).
🤝 5. Commissioned Sales Employees
They can claim all regular employee expenses PLUS:
- Advertising & marketing
- Meals & entertainment (50%)
- Special clothing
BUT must have income that includes commissions.
🧰 CRA Documentation Requirements (Never Skip This!)
To protect your client, CRA expects:
📌 Receipts – detailed, not credit card slips
📌 Logbooks – especially for vehicle claims
📌 Reasonable percentages – for shared expenses
📌 A matching T2200 – that supports the claim
💡 Pro Tip: If CRA reviews the return, they will compare the T2200 line-by-line with the T777 details.
Any inconsistencies = automatic denial.
🚨 Top Mistakes That Get Clients Reassessed
Here are the most common—and dangerous—errors:
❌ Claiming without a T2200
#1 reason CRA denies the claim.
❌ Claiming commuting costs as vehicle expenses
Driving to work is NOT deductible.
❌ Claiming home office expenses when the employee is office-based
Workspace must meet CRA conditions.
❌ Claiming expenses that employer reimbursed
No double dipping.
❌ Incorrectly prorating vehicle expenses
Claim must be based on use percentage, not random amounts.
📦 Example: Reviewing a T2200 Correctly
Scenario:
Client says they use their car for work.
You look at the T2200 and:
- Employer selected “NO” for required motor vehicle use.
- Client still wants to claim gas and insurance.
✔️ Your job: Explain that the claim is not allowed.
Even if the client believes they “use the car for work,” CRA only follows what the employer certifies.
⭐ Best Practices for Tax Preparers
🔹 Always request T2200 AND receipts before preparing T777
🔹 Read every line of T2200 — do NOT assume
🔹 Explain CRA audit trends to clients
🔹 Double-check for reimbursements
🔹 Maintain consistent documentation
🔹 Keep explanations simple and accurate
🧠 Summary – Mastering T2200 & T777
To claim employment expenses:
✔️ Employee must have a valid T2200
✔️ Only allowable expenses can be claimed on T777
✔️ Documentation must support every claim
✔️ CRA audits this area heavily—accuracy matters
With these steps, you’ll confidently handle employment expense claims while protecting your clients from reassessments.
Issues With the T2200 and Common Mistakes Made 📄⚠️
The T2200 – Declaration of Conditions of Employment is the starting point for ALL employment expense claims. If this form is wrong, incomplete, or misunderstood, the entire employment expense deduction can fall apart.
This section will help you master the T2200 so you avoid CRA reassessments and protect your clients.
🔑 Why the T2200 Matters So Much
The T2200 is the permission slip that allows an employee to claim expenses using Form T777.
But the presence of a T2200 does NOT guarantee that expenses are deductible.
This is where many new tax preparers make mistakes.
🖊️ 1. The T2200 MUST Be Legitimately Signed
Before reviewing anything else, scroll directly to the bottom of the form and check:
✔️ Employer’s name
✔️ Authorized individual’s name (HR, finance, supervisor, bookkeeper, etc.)
✔️ Signature
✔️ Date
✔️ Employer’s phone number
📌 Important Note:
CRA often calls the person listed on the T2200 to verify the information.🚨 Missing employer signature or contact information = automatic denial of all employment expenses.
🚫 2. Clients Sometimes Sign Their Own T2200 (Big Problem!)
Some taxpayers assume the T2200 is a personal form they can fill out themselves.
This is invalid, and CRA will deny the claim instantly.
As a tax preparer, you must reject:
- Client-signed T2200s
- T2200s filled out by unauthorized individuals
- T2200s with unclear or fake information
⚠️ Never accept a T2200 unless it is signed by the employer or someone authorized by the employer.
📝 3. Tax Preparers Should NEVER Fill Out the T2200 for Clients
Many clients try to pressure tax preparers to complete the T2200 for them, based on what the client tells you.
Do NOT do this.
Reasons:
- CRA prohibits accountants from completing T2200s on behalf of employees
- You cannot know the employer’s policies
- You cannot confirm reimbursements, allowances, or required conditions
- False information may create legal issues for both preparer and client
❌ Never provide a pre-filled template
❌ Never complete the T2200 using client statements✔️ Tell the client they must get it filled out by HR, their supervisor, or payroll.
🧑💼 4. Exception for Owner-Managers (But With Caution) 🏢
There is one exception where a tax preparer may complete a T2200:
When the employee is also the owner-manager of the corporation and you do the company’s books.
In this case:
- You understand their reimbursement policy
- You know their allowances, mileage logs, and corporate expenses
- You are handling both sides—corporate and personal
BUT ⚠️
CRA has a complicated history with owner-manager employment expenses.
🔍 What CRA Did:
- A few years ago, CRA tried to deny all owner-manager employment expenses, arguing that employees cannot “enter into a contract of employment with themselves.”
📣 What Happened:
- Accounting community pushed back
- CRA reversed the restriction
- Owner-managers are currently allowed to claim employment expenses
📌 Warning Box:
CRA may revisit this rule in the future. Stay updated with legislation changes.
🚫 5. Assuming T2200 = Full Access to All Deductions
One of the BIGGEST mistakes new tax preparers make:
❌ Thinking that once a T2200 is signed, the client can claim EVERYTHING on T777.
This is wrong.
A T2200 only confirms:
- Which employment conditions apply
- What categories of expenses are allowed
- What was reimbursed and what was not
❗ The tax preparer must still evaluate:
- Eligibility
- Reimbursements
- Reasonableness
- Applicable portions
- CRA rules for home office, vehicle, supplies, etc.
📌 The T2200 is a road map, not a blank cheque.
🧭 6. T2200s That Allow ZERO Expenses (Yes, This Happens)
Some employers issue T2200s only to satisfy employee requests—but they mark “NO” to every relevant condition.
This means:
- The employee still has a valid-looking form
- But they cannot deduct ANY employment expenses
Example:
- T2200 says employee “is NOT required to use a vehicle”
- But client insists they “drive all the time for work”
You must follow the T2200—not the client’s opinion.
🕵️♂️ 7. CRA Checks for Fraud or “Funny Business”
CRA specifically monitors:
- Blank T2200s signed by employers
- T2200s with vague or contradictory answers
- T2200s prepared by accountants
- Employees providing fraudulent information to employers
🔒 Protect yourself:
Always keep a copy of the original T2200.
Never alter or complete it.
Compare every line to the T777 before filing.
📂 8. What CRA Looks For During Reviews
CRA frequently performs post-assessment reviews on employment expenses.
During these reviews, they check:
✔️ T2200 authenticity
✔️ Proper employer contact info
✔️ Alignment between T2200 answers and T777 claims
✔️ Proof of non-reimbursement
✔️ Logs, receipts, and usage percentages
✔️ Reasonableness of expenses
🚨 If the claim on T777 contradicts the employer’s answers on T2200, the CRA will deny the deduction—often with no option to appeal.
💡 Pro Tax Tips for Handling T2200s
⭐ Tip 1: Always start at the bottom → signature & contact
If it’s not signed, stop immediately.
⭐ Tip 2: Never trust what the client says—trust the T2200.
⭐ Tip 3: Compare line-by-line with the T777
You cannot claim what the T2200 does not authorize.
⭐ Tip 4: Check reimbursements carefully
If the employer reimbursed the employee for something, it cannot be claimed again.
⭐ Tip 5: Keep documentation
Receipts, logs, calculations, and copies of all forms.
🧠 Summary – Key Mistakes You Must Avoid
Here’s a quick recap of the most critical points:
❌ Clients signing their own T2200
❌ Accountants completing T2200s
❌ Incorrect or missing employer signature
❌ Missing employer phone number
❌ Assuming T2200 = automatic approval of all expenses
❌ Not verifying what the employer reimburses
❌ Claiming expenses even when T2200 indicates “NO”
❌ Not comparing T2200 to the T777 carefully
Doing a Critical Overview of the T2200 Before Claiming Expenses 🔍📄
The T2200 – Declaration of Conditions of Employment is the single most important document when preparing employment expense claims. Before you enter a single dollar on Form T777, you MUST analyze the T2200 with a sharp, critical eye.
This section teaches you exactly how to review the T2200 line-by-line so you can determine:
✔️ If the client is entitled to employment expenses
✔️ What types of expenses can be deducted
✔️ How much can be deducted
✔️ What must be prorated
✔️ Whether adjustments are needed
✔️ Whether CRA may challenge the claim
If you master this section, you will avoid 90% of the mistakes tax preparers commonly make.
🧠 Why a Critical Review Is Required
A T2200 is not a generic permission slip.
Every Yes/No box directly affects whether an expense is allowed.
A tax preparer MUST:
- Read every section
- Compare the T2200 answers with the T777
- Consider employment dates
- Validate reimbursements
- Check for allowances
- Understand which employment category applies
After reviewing, you should know precisely what can and cannot be claimed.
🚨 Step 1: Question 1 – The “Dealbreaker” Question
❗ If Question 1 = NO → STOP. No employment expenses can be claimed.
This is the most critical part of the entire form.
📌 The form itself states:
“If NO, the employee is not entitled to claim employment expenses.”
This question confirms whether the employee was required to pay their own expenses to earn employment income.
✔️ If Yes
Continue reviewing the form.
❗ If No
The T2200 is essentially worthless for tax purposes.
🗓️ Step 2: Check Employment Period (Question 4)
Do NOT assume the employee worked January–December.
This box reveals whether the employment was:
- Full-year
- Partial-year
Examples where this matters:
- The employee started mid-year
- Maternity/parental leave
- Medical leave
- Seasonal work
- Job change within the year
Why this matters for deductions:
You can only deduct expenses during the months the person was employed.
Example
Employee worked April–December → Only 9 months eligible.
If claiming vehicle expenses:
- Either prorate the total expenses
- Or only calculate the expenses for the eligible months
💡 Pro Tip: For vehicle claims, using a prorated method (e.g., 9/12 of expenses) is acceptable when records are annual.
🚗 Step 3: Vehicle Use, Allowances, and Reimbursements (Questions 5 & 6)
These boxes determine whether the employee:
- Used their own vehicle
- Received an allowance
- Used a company vehicle
- Was reimbursed for expenses
🔹 Question 5: Vehicle Allowances
If the employee received:
- A flat monthly vehicle allowance
- A per-kilometre rate
- Any reimbursement
The employer should mark “YES” and specify details.
What you must do as a tax preparer:
- Check the T4 to confirm if the allowance is included in income
- If it’s a flat allowance → It MUST be included on the T4
- Compare the per-km rate with CRA’s reasonable per-km rate
- Ensure no double-dipping (expense claim + reimbursement)
📌 Red Flag:
If an allowance is paid but NOT included on the T4, this signals incorrect payroll reporting. Investigate before filing.
🔹 Company Vehicle
If the employee had a company vehicle:
- This box is marked “YES”
- Their T4 should show:
- Standby charge
- Operating cost benefit
In this case, the employee usually cannot claim their own vehicle expenses.
🛒 Step 4: Other Expense Reimbursements (Question 6)
This section covers employee reimbursements for items such as:
- Office supplies
- Cell phone bills
- Internet
- Travel receipts
If an employer reimbursed an amount, it MUST be listed here.
Why this matters:
If an amount is reimbursed, the employee cannot claim the same expense again.
🚫 Double dipping is prohibited and is one of the top reasons CRA reassesses employment expenses.
📱 Step 5: Unreimbursed Required Expenses (Question 7)
This section lists expenses the employee was required to pay without reimbursement.
Examples:
- Using personal cell phone for business calls
- Buying required office supplies
- Paying for parking when visiting clients
If this box is “YES,” it supports legitimate expense claims.
If it is “NO,” even if the client believes they paid for supplies, you cannot claim them.
💼 Step 6: Commission Employees (Question 8)
Commission employees (e.g., salespeople) can deduct extra categories of expenses compared to regular employees.
But ONLY IF:
- This box is marked “YES”
- Commission income appears on T4 in the “Commission” box
- The employer confirms they are required to pay those expenses
Commission employees can claim additional deductions such as:
- Promotion costs
- Client meals (restricted)
- Certain business-related supplies
💡 Important: Commission employees CANNOT claim more than their commission income unless they qualify under special rules.
🏢 Step 7: Special Employment Situations (Questions 9 & 10)
These boxes apply to employees such as:
- Investment advisors
- Remote employees renting space
- Employees required to maintain an office outside the employer’s premises
Question 9: Renting Office Space
If “YES,” the employee may be able to deduct rent and related costs.
Question 10: Home Office (Very Important!)
This box controls eligibility for home office deductions.
It must include:
- “YES” checkbox
- Percentage of workspace
- Details on any reimbursements or allowances
🏠 Home office claims will be denied if:
- This box is marked “NO”
- The workspace percentage is missing
- Reimbursements are not disclosed
🔧 Step 8: Tradespersons and Specialized Employees (Questions 11–13)
These apply to:
- Tradespersons
- Apprentice mechanics
- Forestry workers
These boxes unlock special expense categories available only to specific occupations.
If your client is in one of these fields, review these carefully.
📌 Summary: What You Must Determine From the T2200
Before claiming expenses, ask yourself these key questions:
✔️ Is Question 1 “YES”?
If NO → All expenses are denied.
✔️ Did the employee work all year or part of the year?
✔️ Was the employee reimbursed for any expenses?
✔️ Did the employee receive an allowance? Is it reasonable and included on the T4?
✔️ Is the employee using their own vehicle or a company vehicle?
✔️ Are they a regular employee or commission employee?
✔️ Are home office details complete and clearly noted?
✔️ Are there any special occupation rules?
🏆 Ultimate Pro Tip Box
⭐ A T2200 must always be treated like a contract. Every Yes/No checkbox legally restricts what can be claimed.
⭐ Never rely on what the client says. Always rely on what the employer declared.
⭐ If a checkbox is missing, unclear, or contradictory → request a corrected T2200 before filing.
🚗 Vehicle Expenses When an Employee Is Allowed a Deduction (T2200 + T777 Guide)
Understanding vehicle-related employment expenses is one of the most important things a new tax preparer must master. Many tax returns get reviewed by the CRA because of mistakes in this area — but with the right approach, you can confidently prepare accurate and audit-proof claims for your clients.
This section is your ultimate beginner-friendly guide to correctly interpreting the T2200 and completing the T777 (Employment Expenses) for clients who use their personal vehicle for work.
🔍 What This Section Covers
- How to identify when a client can deduct vehicle expenses
- How to read the T2200 for vehicle-related permissions
- How to connect the T2200 with the numbers on a T4
- How to calculate deductible vehicle expenses
- How allowances and reimbursements determine eligibility
- How cell phone expenses often tie in
- A complete workflow to ensure you never miss anything
🧩 Understanding When Vehicle Expenses Are Allowed
The T2200 (Declaration of Conditions of Employment) is the key to everything. A client cannot claim vehicle expenses unless the employer certifies certain conditions on the T2200.
Here’s the logic:
✔️ Vehicle expenses may be deducted if:
- The employee must use their own vehicle for work duties
- They are required to travel to meet clients, visit sites, or move between locations
- They do not receive full reimbursement for the expenses
- They receive a taxable allowance (non-reasonable or flat monthly allowance) → often found in Box 40 of the T4
- T2200 Question 1 = YES (mandatory)
❌ Vehicle expenses CANNOT be deducted if:
- T2200 Question 1 = NO
- The employee is reimbursed for all travel costs
- The employer provides a company vehicle (unless they repay certain costs)
- The allowance received is reasonable per-km → then the allowance is non-taxable and vehicle expense claims usually cannot be made
📝 Pro Tip Box
💡 Always check T4 Box 40
When you see a high amount in Box 40, it’s often a signal that the employee received a monthly or flat vehicle allowance. This amount is taxable, and therefore the employee may qualify to deduct vehicle expenses.
Large Box 40 = breadcrumb leading you to check for a T2200.
🏁 Step 1 — Examine the T2200 (Vehicle-related sections)
Here are the sections that matter most:
1️⃣ Question 1 – The Deal-Breaker
👉 Must be YES
If “No,” stop — no expenses allowed.
2️⃣ Employment Period (Question 4)
Check if the employee worked:
- The full year, or
- Part of the year
⏳ If part-year:
You must prorate vehicle expenses based only on the months the employee was actively employed.
3️⃣ Vehicle-specific sections (Questions 5 & 6)
🚘 Question 5 — Vehicle Allowances
Here’s where you discover:
- How much the employer paid per month
- Whether the allowance was included on the T4
- Whether the allowance was per-km or flat
👉 Flat allowance → always taxable → deductible expenses allowed
👉 Reasonable per-km allowance → usually not taxable → expenses NOT allowed
This is where your T4 cross-check happens.
🗂️ Special Note Box
🟦 Reasonable per-km rates (CRA standard)
If the allowance is per kilometre and within CRA limits, it will be non-taxable and employees generally cannot deduct additional vehicle expenses.
Example:
- First 5,000 km → $0.70/km
- After 5,000 km → $0.64/km
(Amounts change annually)
4️⃣ Cell Phone Expenses (Question 7)
If the employer requires the employee to use their personal phone:
- Cell phone bills can be deducted in proportion to business use
- E.g., 2/3 business use → 66% of phone bill deductible
You will include this on the T777 under “Other expenses.”
🚗 Step 2 — Gather Vehicle Expense Proof
Your client must provide:
- Gas receipts
- Repairs & maintenance
- Insurance
- Licensing
- Lease payments OR capital cost allowance (if purchased)
- 🔑 A detailed mileage log (THIS IS CRITICAL)
🛑 CRA Audit Risk Warning
❗ If there is no mileage log, CRA can deny the entire deduction.
Encourage clients to keep:
- Opening odometer reading (Jan 1)
- Closing reading (Dec 31)
- A log of business km vs. total km
📊 Step 3 — Calculate Claimable Vehicle Expenses
You’ll calculate:
Total vehicle expenses × (Business km ÷ Total km)
Example:
- Total km: 20,684
- Business km: 11,874
- Business-use percentage: 57.4%
You apply this percentage to:
- Gas
- Insurance
- Repairs
- Maintenance
- Lease or CCA
- Parking
- Car washes (only when work-related)
📱 Step 4 — Add Cell Phone Expenses (if applicable)
If bill = $1,284
Business use = 66%
👉 Deductible = $1,284 × 66% = $856
🧾 Step 5 — Complete the T777 (Employment Expenses)
T777 includes:
- Motor vehicle expenses (from the worksheet)
- Cell phone
- Other allowed expenses
The final total goes to:
👉 Line 22900 – Employment Expenses
This reduces taxable income and increases refund eligibility.
🎯 Summary Table — Always Follow This Workflow
| Step | What to Check | Why It Matters |
|---|---|---|
| 1 | T2200 Question 1 | Must be YES or stop |
| 2 | Employment period | Proration required |
| 3 | Vehicle allowance details | Determines eligibility |
| 4 | Company car vs. personal car | Different deduction rules |
| 5 | Reimbursed expenses | Cannot double-claim |
| 6 | Mileage log | Mandatory for vehicle claims |
| 7 | Calculate business-use % | Required for proration |
| 8 | Fill out T777 | Final step for claim |
🌟 Final Takeaway for Tax Preparers
Vehicle expense claims can be audit-heavy, but they are fully manageable when:
- You read the T2200 carefully
- You understand what Box 40 is telling you
- You collect proper documentation
- You prorate everything correctly
- You maintain a mileage log
Mastering this area ensures your clients get the deductions they’re entitled to—without CRA headaches.
🚫 Example of a T2200 Where No Employment Expenses Are Allowed (Beginner-Friendly Guide)
Not every T2200 automatically means your client can claim employment expenses.
One of the biggest mistakes new tax preparers make is assuming that “T2200 = deduction.”
In reality, many T2200 forms lead to $0 in deductible expenses—and CRA reviews often target cases where deductions were claimed incorrectly.
This section explains exactly why a T2200 might result in no allowable employment expenses, how to identify these cases instantly, and how to handle optional choices when reimbursement rates are too low.
🧠 Why This Scenario Matters
Understanding this will help you:
- Avoid double-dipping errors ❌
- Protect your clients from CRA reassessments 🔍
- Interpret T2200 forms accurately
- Decide whether a client should claim employment expenses even when they technically could
📌 When a T2200 Produces No Deductible Employment Expenses
A T2200 may still be issued even when no employment expenses are deductible.
Employers may issue the form to show the CRA that:
- The employee incurred expenses, and
- The employer reimbursed those expenses, or
- The employee received a reasonable per-km allowance
Below is the exact logic you must follow.
🚗 1. Reasonable Per-Kilometre Reimbursement = No Vehicle Expense Claim
✔️ If the employer pays a reasonable, per-km allowance, it is:
- Non-taxable
- Excluded from Box 40
- NOT added to employment income
- NOT eligible for expense claims
🔍 CRA considers an allowance “reasonable” when:
- It is paid only based on actual kilometres driven
- It is at or below CRA prescribed rates
💡 For example:
- First 5,000 km: ~56¢/km
- After 5,000 km: ~49¢/km
(Values vary each year)
If the employer pays 40¢/km, and this is below the CRA limit, the reimbursement is non-taxable, and no deduction is allowed.
📱 2. Reimbursed Expenses = No Claim Allowed
If the employee submits:
- Gas receipts
- Repairs
- Cell phone bills
- Meals/entertainment (for salespeople)
- Other supplies
…and the employer reimburses them, then:
👉 They cannot claim any employment expenses on T777.
Why?
❗ Because the employee is not out-of-pocket.
Claiming reimbursed expenses is double-dipping—a major CRA audit trigger.
🟥 ⚠️ RED FLAG BOX — Common Beginner Mistake
Never enter reimbursed expenses on the T777.
Even if the T2200 lists the categories of expenses, a reimbursement negates the deduction.
✏️ Example Summary — Why No Expenses Are Allowed
Your client might have:
- A valid T2200
- Travel requirements
- A vehicle used for work
- Supplies purchased for the job
…but if BOTH conditions below apply:
1️⃣ They received a reasonable per-km allowance
AND
2️⃣ All other expenses were reimbursed
👉 There is $0 allowed on T777.
👉 End of calculation.
🔍 “But what if the reimbursement is too low?” — Important Exception
Sometimes the client might say:
“I only got 40¢ per km, but my real expenses were much higher!”
In this case, the client has two optional approaches to claim the difference.
Option A — Add the allowance to income (line 10400)
- Add the per-km reimbursement as taxable income
- Claim full vehicle expenses through T777
- Net deduction is the difference between true costs and reimbursement
Option B — Keep the allowance as non-taxable
- DO NOT add reimbursement to income
- Deduct business-use vehicle expenses
- Subtract the reimbursement amount on the T777 worksheet
- Claim only the unreimbursed portion
📌 Both options produce the same net claim amount.
The choice depends on:
- Whether the client prefers a bigger deduction
- Whether adding income pushes them into a higher tax bracket
- How large the vehicle expenses actually are
🟦 Quick Comparison Table
| Scenario | Allowable Expense Claim | Why |
|---|---|---|
| Reasonable per-km allowance | ❌ No | Employer already compensated travel; allowance is non-taxable |
| Employee reimbursed for all expenses | ❌ No | Not out-of-pocket → cannot claim |
| Allowance too low but employee wants to claim difference | ✔️ Yes | Must add allowance to income OR deduct reimbursement on T777 |
| Employee receives flat monthly allowance (taxable) | ✔️ Yes | Included in income → can claim actual expenses |
🟨 Example Explained — Why No Deduction Exists
Here is the simplified reasoning chain:
- Employee receives 40¢/km reimbursement
- CRA’s reasonable rate is higher → reimbursement is non-taxable
- The employee is reimbursed for all supplies, meals, phone, etc.
- Employee is not out-of-pocket
- Therefore:
👉 No expenses can be claimed on T777
👉 A T2200 was issued but does not create eligibility
🗂️ Final Checklist — Before You Claim ANY Employment Expenses
Always ask these questions:
✔️ Did the employee receive a reasonable per-km allowance?
➡️ If YES → No vehicle expense deduction
✔️ Did the employer reimburse any expenses?
➡️ If YES → Those expenses cannot be claimed
✔️ Is the employee out-of-pocket for any category?
➡️ Only those amounts are claimable
✔️ Is the client considering claiming more than the reimbursement?
➡️ Then choose:
• Add allowance to income
OR
• Deduct reimbursement from expenses on T777
🌟 Key Takeaway for Tax Preparers
A T2200 does not guarantee deductions.
You must always evaluate:
- Was the allowance taxable or reasonable?
- Were the expenses reimbursed?
- Is the employee truly out-of-pocket?
Mastering this ensures:
- Accurate tax returns
- Happy clients
- AVOIDING costly CRA reassessments
🧾 Commissioned Salespeople: Special Rules & Additional Deductible Expenses (T2200 & T777 Guide)
Commissioned salespeople enjoy a unique tax advantage in Canada—they can deduct more employment expenses than regular salaried employees. But these rules can be confusing, especially if you’re new to tax preparation. This guide breaks everything down step-by-step so you understand exactly what they can deduct, how the T2200 works, and how it flows to the T777.
🚀 Who Counts as a Commissioned Employee?
A commissioned salesperson is an employee who:
- Earns income wholly or partly from commissions, AND
- Has a T2200 declaring they are required to pay employment expenses, AND
- Has commission income reported in Box 42 of the T4.
If Box 42 has an amount → you’re dealing with a commissioned employee.
📌 What Makes Commission Employees Different?
Unlike regular employees, commissioned employees can deduct additional expenses, as long as they:
✔ are required for work,
✔ are not reimbursed,
✔ are listed on a properly completed T2200, and
✔ do not exceed their commission income.
🧩 Understanding the T2200 for Commission Employees
The T2200 is the key to determining what expenses are allowed.
🔍 Key Areas to Review
1️⃣ Vehicle Allowance / Reimbursement
- Box 40 may show a taxable allowance (e.g., $600/month).
- If the allowance is included in income, the employee can claim vehicle expenses on T777.
2️⃣ Employer Reimbursements
📌 Critical rule: If an employee is reimbursed for an expense → no deduction allowed.
The T2200 question “Did you require them to pay expenses for which they did NOT receive reimbursement?” must say YES for a deduction.
3️⃣ Commission Income (Box 42)
This sets the maximum amount of commission-related expenses the employee can deduct.
💼 What Commission Salespeople Can Deduct (Beyond Regular Employees)
Commission employees can deduct everything regular employees can, plus special additional expenses.
🎯 Expenses Regular Employees Can’t Deduct — But Commission Employees Can
| Expense Type | Allowed for Commission Employees? | Notes |
|---|---|---|
| ✔ Advertising & Promotion | Yes | Flyers, online ads, business cards, sponsorships |
| ✔ Meals & Entertainment | Yes (50%) | Must be client-related |
| ✔ Accounting & Legal Fees | Yes | Only if related to earning commission income |
| ✔ Promotional Events | Yes | Conferences, networking functions |
| ✔ Special Supplies | Yes | If used to earn commissions |
📌 These expenses can be claimed up to the amount of commission income (Box 42).
📘 Flow to T777: How It Works
The T777 Employment Expenses form divides expenses into two sections:
1️⃣ Section A — Regular Employment Expenses
Examples:
- Vehicle expenses
- Cell phone
- Supplies
- Parking
- Home office (if allowed)
2️⃣ Section B — Additional Commission-Deductible Expenses
Examples:
- Advertising
- Promotion
- Meals & entertainment
- Accounting/legal fees
⚠️ Total of Section B expenses + Section A (if applicable) cannot exceed commission income in Box 42.
📉 Example of the Limitation Rule
If total eligible expenses = $13,500,
and commission income = $12,000,
👉 Only $12,000 can be claimed.
No carryforward is allowed.
📝 Practical Tips for Tax Preparers
✔ Tip 1 — Check Reimbursements Carefully
If reimbursed → no deduction.
Reimbursed expenses must be removed from T777 entirely.
✔ Tip 2 — Confirm Commission Income
Box 42 must match the amount written on the T2200.
✔ Tip 3 — Review Reasonableness
CRA examines commission employees closely because these claims are often large.
✔ Tip 4 — Separate Personal vs Business Expenses
Only the business-use portion is deductible (e.g., cell phone, vehicle).
📦 SEO-Optimized Knowledge Box: Allowed vs Not Allowed
✅ Allowed for Commission Salespeople
- Vehicle expenses 🚗
- Cell phone 📱
- Supplies 📦
- Home office (if required) 🏠
- Advertising 💬
- Meals & entertainment 🍽️
- Accounting and legal fees 📑
- Promotion and client networking ⭐
❌ Not Allowed
- Expenses reimbursed by employer
- Personal expenses
- Clothing (unless safety-required)
- Capital property (e.g., laptops)
💡 Pro Tip Box
👉 Commission employees sometimes think they can deduct unlimited expenses — but CRA strictly limits deductions to the amount of commission income. Make this one of your first checks when reviewing their claim.
🎯 Summary
Commissioned employees have special tax deduction privileges, but they also come with strict rules:
- Must have a T2200 ✔
- Expenses must be required AND unreimbursed ✔
- Additional expenses allowed (advertising, promotion, meals, legal fees) ✔
- Deductions capped at commission income ✔
As long as you follow the T2200 carefully and ensure no reimbursed expenses are claimed, you can confidently prepare employment expense claims for commissioned salespeople.
🧩 Dealing With Specific Employment Expenses (CCA, Vehicle, Home Office & More)
Employment expenses can get complicated—especially when you deal with depreciation (CCA), vehicle claims, home office deductions, and special rules for employees vs. commission earners. This section breaks everything down so even a new tax preparer can confidently understand and apply the rules.
🏗️ Capital Cost Allowance (CCA) & Depreciation
CCA allows employees (in limited situations) to deduct the depreciation of certain assets they purchased to earn employment income.
⚠️ Important Warnings
CCA for employees is high-risk and often reviewed by CRA.
❌ High-risk CCA items:
- Laptops & computers
- Office furniture
- Home office equipment
Because these items are usually used both personally and professionally, CRA often questions the deduction, reduces it, or disallows it.
👉 General advice: Avoid claiming CCA for employees unless it is clearly necessary, well-supported, and the T2200 confirms the employee must supply their own equipment.
🚗 CCA on Vehicles (When Allowed)
If an employee purchases their vehicle (instead of receiving an allowance or using mileage reimbursement), they may claim CCA only for the business-use portion.
Vehicle Classes
| Vehicle Type | Class | Rule |
|---|---|---|
| Passenger vehicle | 10.1 | CCA capped at $30,000 + GST/HST/PST |
| Non–passenger vehicle | 10 | No cap; CCA based on actual cost |
📘 Additional Vehicle Rules
- CCA must be prorated based on business km ÷ total km.
- Terminal losses are not allowed for employment expenses.
- Recapture applies only to Class 10 (not 10.1) when the vehicle is sold or traded.
💲 Vehicle Loan Interest (Special Rule)
Employees may deduct up to $300 per month of interest on a loan used to purchase the vehicle.
🚘 Vehicle Expenses Rules (Quick Summary Box)
📌 Employees may claim:
- Fuel
- Repairs
- Insurance
- Licence & registration
- Leasing costs (up to CRA limits)
- CCA (with restrictions)
- Loan interest (max $300/month)
📌 ONLY if:
- Required by employer (T2200 signed)
- Not reimbursed
- Used for employment (business km only)
🏠 Home Office Expenses for Employees
Home office rules for employees are similar to those for self-employed individuals—but with stricter limits.
✔ Eligibility Requirements
Home office expenses are allowed only if the employee:
1️⃣ Mainly works from home (more than 50% of the time)
OR
2️⃣ Uses the workspace exclusively to meet customers or clients on a regular basis
🧾 What Each Employee Type Can Deduct
👨💼 Salaried Employees (Non-Commission)
Allowed:
- Heat
- Electricity
- Water
- Maintenance
Not Allowed:
- ❌ Mortgage interest
- ❌ Property taxes
- ❌ Home insurance
🧑💼 Commission Employees (Box 42 on T4)
They may deduct everything salaried employees can, plus:
- ✔ Property taxes
- ✔ Home insurance
Still not allowed:
- ❌ Mortgage interest
🏡 Special Home Office Rules You MUST Know
❌ Home Office Cannot Create a Loss
If employment expenses fully offset employment income, home office expenses cannot reduce income below zero.
This prevents employees from using home office expenses to offset:
- rental income
- employment income from a second job
- investment income
- business income
CRA strictly disallows this.
🔎 Example
If a taxpayer earns $10,000 employment income,
and all other allowed expenses = $10,000,
👉 Home office expenses = $0 allowed (because they would create a loss).
📘 Common CRA Review Triggers (Must Know!)
CRA often reviews home office and employment expense claims for:
🚩 Large CCA on computers or furniture
🚩 High vehicle expenses with low employment income
🚩 No T2200 or T2200 with vague answers
🚩 Full-year home office claims for employees who normally work on-site
🚩 Claims made despite employer reimbursements
As a preparer, always keep receipts and mileage logs and ensure expenses match the T2200.
🧰 Handy CRA Resource
CRA’s guide T4044 – Employment Expenses provides official rules and examples for all allowable and disallowed expenses.
💡 Quick Tips for New Tax Preparers
✨ Always check if the employer reimbursed the expense—if yes → NO deduction
✨ Review the T2200 carefully; it dictates what is allowed
✨ For vehicles, prioritize actual km records
✨ Avoid claiming CCA unless absolutely necessary
✨ Home office deductions are usually small—don’t expect large savings
✨ Commission employees have more generous rules, but still no mortgage interest
🏁 Final Summary
Specific employment expenses require careful handling. As a tax preparer, you should:
✔ Understand CCA limits
✔ Know the difference between Class 10 vs. 10.1 vehicles
✔ Apply the $300/month interest limit
✔ Follow strict home office rules
✔ Use T2200 as your primary source of truth
✔ Ensure nothing reimbursed is ever claimed
Mastering these rules ensures accurate returns—and protects clients from unnecessary CRA reviews.
🧾 GST/HST Rebates for Employment Expenses: The Ultimate Beginner-Friendly Guide
Understanding the GST/HST rebate is a must for any tax preparer working with employment expenses. This section breaks everything down in simple language, with practical examples, warnings, tips, and SEO-friendly formatting. If you master this section, you’ll be ahead of most beginner preparers.
💡 What Is the GST/HST Rebate for Employees?
Employees who incur employment expenses (vehicle, cell phone, supplies, etc.) may be entitled to recover the GST/HST they paid on those expenses.
Think of it like a mini input tax credit, but for employees—not businesses.
✔ Claimed using Form T777 – Statement of Employment Expenses
✔ Automatically calculated by tax software when expenses are entered correctly
🧩 When Does an Employee Qualify for the GST/HST Rebate?
To qualify, BOTH conditions must be true:
✅ 1. Employee incurred eligible employment expenses
Examples:
- Vehicle fuel & maintenance
- Leasing costs
- Supplies
- Cell phone bills
- Parking (HST may or may not apply depending on provider)
✅ 2. Employer is registered for GST/HST
Most businesses in Canada ARE registered except:
- ❌ Financial institutions
- ❌ Certain exempt organizations (e.g., insurance businesses)
- ❌ Businesses that supply only exempt services
If the employer is not registered → rebate is not allowed.
🗂️ How the Rebate Is Calculated (The Simple Version)
You do not manually separate the GST/HST portion.
You simply:
1️⃣ Enter the full amounts of the GST/HST-paid expenses
2️⃣ Put them in the GST or HST columns of the worksheet
3️⃣ Software calculates the rebate for you
4️⃣ The rebate appears on line 45700 of the T1 return
💵 Example:
If the employee paid:
- $9,386 in eligible expenses
- With applicable GST/HST
Their rebate might look like:
- $883 in Ontario (HST province)
- $693 in Alberta (GST-only province)
The rebate amount changes based on:
- The total expenses
- The province
- The business-use percentage
📍 Where the Rebate Shows on the Tax Return
On the T1 return, the rebate appears as a:
⭐ Refundable credit → Line 45700 – Employee and partner GST/HST Rebate
This increases the refund or reduces taxes owing.
🔁 IMPORTANT: GST/HST Rebate Is Taxable Next Year
This is where beginners get confused.
👉 The rebate must be added to income in the following tax year
It goes into employment income, typically line 10400.
Example:
If the rebate this year is:
$883
Next year, you add:
+$883 to taxable income
This means the client may pay tax on a portion of that rebate later.
⚠️ HIGH-RISK AREA: Why CRA Frequently Reviews GST/HST Rebates
Claiming the GST/HST rebate automatically increases CRA scrutiny.
📌 Why?
Because employees who claim a rebate almost always claim:
- Vehicle expenses
- Cell phone
- Supplies
- Home office
- Commission expenses
These are ALL areas CRA examines closely.
Expect a CRA review letter asking for:
📑 All vehicle expense receipts
📑 Mileage log
📑 Gas & repairs invoices
📑 Cell phone bills
📑 Supply receipts
📑 Proof of business-use percentages
📦 ⚠ Risk Management Box: Should You Claim the Rebate?
Sometimes claiming the rebate costs the client more in the long run or triggers an audit that reduces larger deductions.
❗ When Claiming the Rebate is NOT Worth It:
- Client has poor receipts
- Vehicle logbook is incomplete
- Employment expenses were estimated
- Rebate is small (e.g., under $500)
- Client is in a high tax bracket (since rebate is taxable next year)
Example:
Rebate = $883
Tax next year (approx.) = $350
Net benefit = ~$533
Risk = CRA reduces $9,000 of expenses → could cost the client thousands
✔ When You SHOULD Claim It:
- Client keeps perfect receipts
- Mileage logbook is strong
- Employer is GST/HST registered
- Expenses are large & well-documented
- Client demands the rebate
- Commission employees with high expenses
🧮 GST vs. HST — Which Column to Use?
📍 HST Provinces
Use HST column for:
- ON
- NS
- NB
- NL
- PEI
📍 GST-Only Provinces
Use GST column for:
- AB
- BC
- SK
- MB
- QC (uses QST + GST; only GST portion is eligible)
📝 What Types of Expenses Are Eligible for Rebate?
🚗 Vehicle expenses (business-use portion):
- Gas ⛽
- Maintenance 🔧
- Leasing payments
- CCA (special handling)
- Car washes
- Parking (if GST/HST charged)
📱 Cell phone bills:
- Only the portion used for employment
- GST/HST automatically included in bill
🛒 Supplies:
- Stationery
- Professional supplies
- Tools (where applicable)
📘 Special Note Box: No Rebate on These Items
❌ Insurance (vehicle insurance does NOT have HST)
❌ Vehicle licence & registration
❌ Meal & entertainment expenses
❌ Home office utilities if GST/HST was not charged
❌ Employer-reimbursed amounts
🧑💼 Checklist for Tax Preparers (Must Use!)
Before claiming the GST/HST rebate, confirm:
✔ Employer is GST/HST registered
✔ Client has complete receipts
✔ Mileage log exists
✔ T2200 is properly filled
✔ Expenses are reasonable for their job
✔ Client understands next year’s taxable income increase
💬 Client Conversation Script (Super Helpful!)
“You qualify for the GST/HST rebate, which can increase your refund this year.
However, CRA often reviews these claims and may ask for receipts for all employment expenses.
The rebate will also be added to your income next year.
Your total benefit is likely around $___ after tax.
Would you like to proceed or avoid the additional review risk?”
This script helps set expectations and avoids problems.
🏁 Final Summary
The GST/HST rebate is powerful but comes with risks.
As a tax preparer, your job is to:
✔ Enter expenses in the right HST/GST columns
✔ Ensure the employer is registered
✔ Know which expenses qualify
✔ Understand that the rebate is taxable next year
✔ Use professional judgment before claiming
✔ Prepare your clients for possible CRA review
Mastering this will immediately elevate your tax-preparer skills—especially with clients who have employment or commission-based expenses.
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