If you are an employee who earns commission income, you need to ensure that you are maximizing the deductions claimed on your tax return to ensure that you are receiving the largest tax refund possible when filing your tax return.
Typically, tax payers are allowed to claim deductions up to the amount of commissioned based income you earned in the tax year. To identify your commission income for the tax year you can simply look at your T4 for the Box number 42 amount.
What are the allowable deductions?
The most common allowable deductions that can be claimed on your tax return are:
- Accounting and legal fees
- Advertising and promotion costs
- Entertainment costs
- Travel costs
- Training costs
- Home office costs
- Vehicle costs
Please note, tax payers cannot claim deductions for items or which they received a reimbursement from their employer.
Additional requirements for home office deduction claim
To make use of the home office deduction claim on your tax return you must meet one the following criteria:
- Tax payer works from their home office more than 50% of the time
- Tax payer uses the office space solely for work activities and uses the space regularly for work meetings
The home office deductions are claimed on the tax return in proportion to the total home space which is used for work activities, this can be calculated based on a square foot percentage or per number of rooms percentage. Ie the tax payer uses one room out of five total rooms in the home for their work office, this means that they can claim 1/5 = 20% of their allowable home office deductions on their tax return.
Commissioned based employees are eligible to claim home insurance and property taxes as part of the eligible home office deductions, these are not allowable for non commissioned based employees.
Additional requirements for vehicle deduction claim
When claiming vehicle deductions on your tax return as a commissioned based employee you are fortunate to be able to claim a portion of your vehicle’s depreciation as a deduction on your tax return, in addition to the usual gas, insurance, repair and maintenance that is available to non commissioned based employees.
When claiming vehicle expense deductions on your tax return it is important to maintain a vehicle log in which you track the vehicle usage over the tax year, tracking the percentage of kilometers which are specifically work relate. When claiming the vehicle expense deductions on your tax return the claim is limited to the percentage of the vehicle usage which was work related. For example – A tax payer drives the vehicle 10,000km in the tax year, of which 5,000km were work related, this means that only 50% of the vehicle related costs (gas, insurance) are eligible to be deducted in the tax return.
It is important to retain the vehicle log in case audited by Canada Revenue Agency in the future for vehicle deductions.
Ask your employer for a signed T2200
When claiming expenses related to your employment on your tax return it is important to secure a signed T2200 from your employer. This is essentially a confirmation from your employer stating that you are eligible to claim certain expenses related to costs incurred from your employment on your tax return. Having a T2200 to hand will provide an easy answer to the Canada Revenue Agency if they ask for proof of your eligibility to claim the deductions on your tax return.
Questions / Assistance with tax filingIf you are a commissioned based employee, and are unsure of how to maximize your deductions and increase your tax refund, then please get in touch with the Jackstaxback team at team@jackstaxback.com . We will be more than happy to assist you with a tax consultation as well as assistance with your tax filing to ensure you receive the maximum allowable tax refund possible. At this time (January 2023) or Vancouver located office is not open for walk ins. We are operating a satellite office and can handle your queries over the phone or email. We will continue to offer Canadian tax filing services over email as usual.