Moore
August 2022 Newsletter

In most cases, employees get very few deductions in computing their employment income.

Conversely, if you are self-employed, meaning that you carry on a business, you are eligible for more deductions.

If you are an employee paid by sales commissions, you fall somewhere in the middle. First, you are entitled to deductions available to other employees, which can include, among others:

  • Car expenses for work use like gas, oil, minor repairs and maintenance
  • Travel expenses for work, including one-half of meal expenses when out of town for at least 12 hours
  • Union or professional dues
  • Supplies, including home office expenses like maintenance, rent, heat, and utilities (pro-rated based on the size of the home office relating to the home as a whole)
  • Contributions to your employer sponsored registered pension plan
  • Financing charges for a leased or purchased car for work, and tax depreciation on the car

If you are a commissioned employee, you can deduct additional expenses as well. They include:

  • 50% of meals and entertainment spent on clients or customers
  • Advertising and promotional expenses
  • Additional home office expenses, such as property tax and insurance (again, pro-rated based on the size of the home office)

However, there is a bit of a catch, which is not actually detrimental in most cases.

As a commissioned employee, many of these deductions are generally limited to the amount of your commission income. However, if your car and travel expenses exceed your commission income, you can deduct those expenses in full, but not the additional expenses mentioned above.

Example

I am a commissioned sales employee.

This year I incur the following work expenses, pro-rated where appropriate:

  • $25,000 car and travel expenses (other than financing charges and tax depreciation)
  • $4,000 home office supplies
  • $8,000 advertising and promotion
  • $3,000 property tax and home insurance

These expenses total $40,000.

So if my commission income for the year is more than the $25,000 car and travel expenses, I would claim as many of the deductions as possible, up to my commission income.

But if commission income was, say $23,000, I would claim the $25,000 car and travel expenses, because otherwise I would be limited to the $23,000 commission income.

As for all employees, you are required to have a Form T2200 from your employer, certifying that you are required to incur these expenses for employment purposes.

Last modified on August 15, 2022 12:00 am
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