Tax Deductions for Employees in Canada: What You Can Claim

Many Canadian employees assume that because taxes are deducted from each paycheque, there is nothing left to claim at tax time. That is not always true. Depending on your job and situation, you may be entitled to several deductions that can reduce your taxable income and increase your refund.

This guide walks you through the most important tax deductions available to employees in Canada.

Can Employees Claim Deductions in Canada?

Yes, but the rules are stricter than for self-employed individuals. As an employee, you can only claim employment expenses if your employer requires you to pay them as part of your job, and if the type of expense is specifically allowed by the Income Tax Act.

For most employment expenses, you will need a signed Form T2200 (Declaration of Conditions of Employment) from your employer confirming you are required to incur those expenses.

Employment Expenses (Form T777)

Form T777 (Statement of Employment Expenses) is used to claim deductible work-related costs. Eligible expenses depend on your type of employment, but commonly include:

• Home office expenses (for employees required to work from home)
• Vehicle expenses (for employees required to use their own vehicle for work)
• Travel expenses (accommodation, meals at 50%)
• Supplies required for work
• Salary paid to an assistant (if required as a condition of employment)
• Legal fees to collect wages owed

You claim these on Line 22900 of your T1 return.

Home Office Expenses

If your employer required you to work from home and you use part of your home for work, you can deduct a portion of eligible home expenses (rent, utilities, internet, maintenance). The space must be where you mainly do your work, or used exclusively for meetings with clients or customers.

You need a signed T2200 or T2200S from your employer and must file Form T777 or use the flat rate method if applicable.

Vehicle Expenses for Work

If your employer requires you to use your own vehicle for work (not commuting), you can deduct a portion of:

• Gas
• Insurance
• Maintenance and repairs
• Lease payments
• Depreciation (CCA on the vehicle)

The deductible portion is based on the percentage of total kilometres driven for work versus personal use. You must keep a mileage log.

A signed T2200 is required to claim vehicle expenses.

Tools and Tradesperson Deductions

Eligible tradespersons can deduct the cost of eligible tools purchased to earn employment income. The deduction is limited and calculated using a specific formula. An apprentice mechanic may also qualify for the Apprentice Mechanics Tools deduction.

Professional Dues and Union Fees

Dues paid to professional associations or unions required as a condition of employment are deductible. These are entered on Line 21200 of your T1 return. Examples include nursing association dues, law society fees, and trade union fees.

Note: You do not need a T2200 for professional and union dues – these are directly deductible.

Moving Expenses

If you moved at least 40 kilometres closer to a new place of work (or full-time school), you can deduct eligible moving expenses. These include:

• Transportation costs
• Movers or rental trucks
• Temporary accommodation (up to 15 days)
• Meals during the move (at the simplified method)
• Costs to sell your old home
• Legal fees and land transfer taxes on the new home

Moving expenses can only be deducted against income earned at the new location.

RRSP Contributions

Contributing to your RRSP is one of the most effective deductions for employees. Contributions reduce your taxable income dollar for dollar. Contributions made within your RRSP deduction limit are fully deductible. This is one deduction that applies to everyone who contributes within their limit.

Childcare Expenses

If you paid someone to care for your child so you (or your spouse) could work, go to school, or carry on research, you may be able to deduct those childcare costs. Eligible expenses include daycare, babysitters, nursery schools, and overnight camps (limited amounts).

The claim must generally be made by the lower-income earner in the family.

Other Deductions Employees Often Miss

• Carrying charges and interest paid on money borrowed to earn investment income (Line 22100)
• Legal fees to establish entitlement to employment income, salary, or wages
• Disability supports for work (devices or services needed to earn income due to a disability)
• Certain musical instrument expenses (for employed musicians)
• Artist employment expenses (for employed artists)

Table of Summary

Frequently Asked Questions

Can I claim my work clothing as an employment expense?

In most cases, no. Standard business attire is considered a personal expense. Protective clothing required for safety on the job may be deductible, but only if required by the employer and confirmed on Form T2200.

Can I deduct the cost of my cell phone if I use it for work?

Only the business-use portion, if your employer requires you to provide your own phone for work. This needs a T2200.

Is commuting to work deductible?

No. The cost of getting to and from your regular place of work is a personal expense and is not deductible.

Conclusion

As an employee, there are more deductions available than many people realize. From home office expenses and union dues to moving costs and RRSP contributions, taking advantage of every eligible deduction reduces your tax bill and can result in a larger refund.

If you are unsure what you can claim, a tax professional can review your situation and ensure you do not miss anything.

Need Help With Canadian CRA-compliant filing?

Taxccount helps Canadian employees, self-employed individuals, and businesses with tax preparation, deductions, and CRA-compliant filing. Book a free consultation today.

This is general information only and not professional advice. Consult a professional before acting.