As the tax-filing deadline closes in on us (it's April 30),
the scramble to find tax breaks, deductions, credits –
anything really – to cut the tax bill begins. Last time, I
covered a few tax-saving tips for
investors. But there are plenty of lucrative deductions
available for everyone else as well. Here the most important ones
Home office expenses
The deduction applies to situations where the office is either
the principal place where the employee's employment duties are
performed (which may not always be the case) or that is used
exclusively for employment purposes and on a regular and continuous
basis for meeting customers or others in the course of performing
If you rent your home, you can claim a prorated portion of rent
expenses. If you own your home, the Canada Revenue Agency's
position is that only certain expenses can be claimed. Generally,
these are maintenance expenses such as fuel, electricity, cleaning,
minor repairs, and the like. Expenses such as depreciation, taxes,
insurance, and mortgage interest will not be allowed (special rules
apply to commission sales employees).
expense. By the way, home
office writeoffs can also be claimed against business and
professional income. Canada Revenue Agency technicals released in
the early 2000s have indicated that the writeoff might be claimed
against rental income and possibly other types of investment
income, if justifiable.
Employees who receive mileage allowances will have the option of
adding these amounts to their taxable income and claiming actual
motor vehicle expenses (in some cases, the add back will be
mandatory). To be eligible to claim motor vehicle travelling
expenses, an employee must ordinarily be required to carry on
employment duties away from the employer's place of business or
in different places.
Supplies/salaries to an "assistant"
A deduction is allowed for supplies that are required to be
furnished under your employment agreement. These must be items that
are "used up" or "consumed." Potentially, this
could include stationery, pens, pencils, tape, computer paper
supplies, ink cartridges, or electronic media that can't be
reused. The CRA also allows long-distance telephone calls and
cellular telephone airtime that relates to the earning of
employment income, but not monthly basic telephone charges or
hook-up costs, or special clothing or books. Also deductible are
salaries to an assistant, which may include the cost of
stenographic and secretarial assistance.
To claim these writeoffs, you must complete Form T2200 and have
your employer sign it. This form certifies that as part of your
employment agreement, you are required to maintain a home office
and/or pay part or all of these expenses. Form T2200 does not
actually have to be filed with your return, but you must keep a
signed copy in your files as it is possible that Canada Revenue
Agency might call you up to verify that you have a signed copy in
Employees may deduct legal expenses for collecting salary or
wages from an employer or former employer. This includes legal fees
for collecting amounts owing and establishing your legal right to
the salary or wages to begin with.
A related rule allows a deduction for legal expenses for most
pension benefits and most job severance payments ("retiring allowances"). However, in this case, the
deduction available in any year is limited to the amounts on which
you pay tax – that is, the original sum minus amounts
"rolled over" into an RRSP or registered pension plan.
(This tax break is available for employment prior to 1996.) Any
excess legal expenses can be deducted against taxable retiring
allowances and pension benefits received in subsequent years, for
up to seven years in the future.
The CRA provides new housing rebates for individuals who have purchased or built a new house or have substantially renovated a house or made a major addition to a house who plan on living in it personally or letting a relative live there.
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