Most new employees can benefit from an onboarding process that includes information about claiming reimbursements for out-of-pocket expenses, pension contributions, or how to deduct unreimbursed costs. Here’s a primer to share.
A tax credit for every employee
A non-refundable tax credit is available for all people who report employment income. It’s called the Canada Employment Amount and it’s claimable without receipts to reduce taxes payable. It covers the costs of travelling to and from work, or other personal costs of working, like buying lunches, new shoes, dry cleaning and so on.
For 2026 the maximum claim is $1,501 on the federal tax return.
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What tax forms are needed?
Employees who incur additional expenses out of pocket as a condition of their employment contract will need additional forms:
Allowable deductions are slightly different in different sectors. Those earning commissions can claim additional deductions over those who earn salary only. Eligible educators, truckers, musicians, artists, forestry workers, personal support workers, as well as some tradespeople and construction workers can make claims with various nuances.
Some claims are limited to the employment income (or commissions earned). Some qualify for carry forwards white others don’t. The common thread? In each case, receipts, logs, and details are required, as well as verification from the employer that the costs are necessary and any amounts of reimbursement.
Travel expenses
Travel costs are claimable only if:
- The employee had to pay their own expenses and was not reimbursed (or was paid a reasonable non-taxable allowance)
- Was regularly required to work away from your employer’s place of business or in different places
- Has kept records of travel and expenses
- Has a completed Form T2200
All of the above conditions must be true, in which case, the following expenses are allowed:
- Travel costs for bus, train, airlines, Uber if travelling outside the metropolitan area
- Motor vehicle expenses, which can include operating costs as well as fixed costs like capital cost allowance (CCA), leasing costs and interest.
- Truckers – Expenses incurred by employees of a transport company for meals and lodging, while away from the employer’s establishment and metropolitan area (form TL2)
- Railway Employees – Expenses incurred for meals and lodging when away from the taxpayer’s ordinary place of residence, municipality, and metropolitan area
- Costs of flying an aircraft required in employment
Meals while traveling
The rules about meals are tricky and misunderstood by most employees. You must be away from your employer’s work location for at least 12 consecutive hours to deduct expenses—and even then, only 50% of food, entertainment, and beverage costs are allowed. There are some exceptions depending on your role.
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Note the extent of the detail: Long-haul truckers driving trucks or tractors weighing more than 11,788 kg. to haul freight at least 160 kilometers away from the employer’s place of business can claim 80% of food and beverage costs if travelling for 24 hours or more.
More fun facts: With receipts, truckers who sleep in their cabs can deduct the cost of showers along the way. There are both simplified (cost per meal) and detailed (keep all receipts) deduction options available.
Commissioned salespeople can claim more than salaried employees. Sales expenses like marketing, gifts, and promotional costs may be claimable, but they can’t exceed commissions earned (unless claimed under the travel expense options instead).
There is a big tax trap, however. Employed commissioned salespeople are subject to the same 12-consecutive-hour rules as other employees.
Home workspace costs
These costs are claimable if the employee worked out of their home more than 50% of the time for a period of at least 4 consecutive weeks to earn their employment income. The space must be used to regularly and continuously meet clients, customers, or others in the course of employment duties. In practice, this can include online meetings. Costs must be prorated to the area of the office space used as a percentage of all other space, including hallways, bathrooms, and kitchens.
Salaried employees can make this claim, but beware: the costs of insurance, property taxes, interest, and capital cost allowance are claimable by commissioned employees only.
