Employee's allowable employment expenses

Your employee may be able to claim certain employment expenses on their income tax and benefit return if, under the contract of employment, the employee had to pay for the expenses in question. This contract of employment does not have to be in writing but you and your employee have to agree to the terms and understand what is expected.

Examples

  • You allow your employees to use their personal motor vehicle for business and pay them a monthly motor vehicle allowance to pay for the operating expenses and you include the allowance in the employees' employment income as a taxable benefit; or
  • You have a formal telework arrangement with your employees that allows the employees to work at home. Your employees pays for the expenses of their work space on their own

You have to fill out and sign Form T2200, Declaration of Conditions of Employment, and give it to your employee so they can deduct employment expenses from their income. By signing the form, you are only certifying that the employee met the conditions of employment and had to pay for the expenses under their employment contract.

It is the employee's responsibility to claim the expenses on their income tax and benefits return and to keep records to support the claim.

For more information on allowable employment expenses, see:

Example: Reimbursement for automobile and motor vehicle expenses 

You are the owner of a grocery store. You have employed twenty employees, some work in the store and others are on the road. For the employees working on the road, you do not pay an allowance to them but they are required to complete a log book and keep receipts for reimbursement purposes. They have to file an expense report and attach receipts. You do not reimburse anything more than what is on the expense receipts, for example, gas, oil change expenses, etc. That is the company policy.

In this example, the reimbursement is not considered a taxable benefit because the employee is reimbursed for expenses related to the same use of the vehicle

Your employees cannot claim the reimbursed expenses on their income tax return. However, they can claim additional expenses related to the use of their vehicle, such as licence and registration fees and the capital cost allowance, by completing Form T777, Statement of Employment Expenses.

You will also need to complete Form T2200, Declaration of Conditions of Employment, and provide it to your employees.

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