Employment Income Chapter 3 Part II

1
Employment IncomeChapter 3(Part II)
2
Office or Employment Income

• Determined under Division B, subdivision a
• Section 5 Salary wages and other remuneration
  (includes gratuities) received in the year (cash
  basis)
• Section 6 Specific Inclusions (benefits)
• Section 7 Stock Option Benefits
• Section 8 Deductions Allowed

3
Section 8

• Deductions that can be claimed in computing
  income from office or employment
• Expenses must
• relate in some manner to the earning of
  employment income - Ssec.8(1)
• Be reasonable in the circumstances sec. 67

4
Section 8

• Subsection 8(2) specifically limits deductions
  from employment income to those specified in
  Section 8.

5
Other Deductions

• Legal Expenses Par. 8(1)(b) for expenses incurred
  to collect remuneration from employer
• Dues and other expenses Par. 8(1)(i)
• Professional dues
• Office rent paid
• Salary paid to an assistant (incl. CPP and EI)
• Cost of supplies paid
• Annual union membership dues paid
• (Must be required for employment and file form
  T2200)

6
Other Deductions

• Par.8(1)(m) Registered Pension Plan contributions
  deductible subject with limitations.
• If money purchase plan
• Contributions limited to the lesser of
• 16,500 less employer contributions
• 18 of earned income less employer contributions
• If defined benefit plan, only limited to 16,500
  of contribution per year.

7
Section 8

• Par.8(1)(f) allows deduction of expenses incurred
  for the purpose of earning income from employment
  for employees who sell property or negotiate
  contracts.
• Subject to general restrictions in Section 67
• IT-522R
• Limited to commission or other payment based on
  sales.

8
Sales/Negotiating Persons Expenses

• To deduct expenses under Para.8(1)(f) must
• Be required to pay own expenses as written in
  employment contract
• Ordinarily be required to travel away from the
  employers place of business
• Have remuneration dependent on volume of sales or
  contracts
• Not receive a non-taxable allowance

9
Optional Deductions for Salesperson

• Employees qualify for deductions under
  Par.8(1)(f) can, as an alternative, choose to
  claim expenses under Par. 8(1)(h) and (h.1)
• Par.8(1)(f) includes
• Expenses incurred to earn income from employment,
  including entertainment expenses
• Travel expenses
• Automobile expenses
• Par.8(1)(f) limited to commission or other
  payment based on sales. Par.8(1)(h) and
  Par.8(1)(h.1) has no restriction.

10
Auto rules-Deductions Available to Individuals

• Employee Deductions
• Par.8(1)(f) salesperson expenses
• Par.8(1)(h.1) Motor vehicle expenses of employee
• Par.8(1)(j) Interest and CCA

11
Travelling and Motor Vehicle Travelling
ExpensesPara. 8(1)(h),8(1)(h.1)

• Conditions
• Must ordinarily be required to carry out duties
  away from employers place of business
• Employee must be required to pay for expenses by
  employment contract
• Cant receive of a tax-exempt allowance
• Must file form T2200

12
Travelling ExpensesLimitations

• Meals deductible only if taxpayer is away for 12
  hours or more (ssec. 8(4))
• Meals and entertainment 50 deductible (sec.
  67.1)

13
Motor Vehicle Air Craft Expenses

• Deductions available under Par.8(1)(j)
• Interest on loans for motor vehicles or air
  crafts
• Capital Cost Allowance

14
Motor Vehicle Expenses

• CCA limited to 30,000PSTGST capital cost and
  30 CCA rate
• Interest borrowed for a passenger vehicle is
  lesser of
• Actual amount payable or paid (IT-522R par.28)
• 300 for each 30-day period that loan was
  outstanding (Reg.7307(2))

15

• Salespersons expenses
• 8(1)(f)
• Limited to amount of commissions or similar
  amounts
• Not limited to type of expenses (except capital
  expenditures and expenditures on use of
  recreational facilities and club dues)

• Travel and Motor Vehicle Travel Expenses
• 8(1)(h) 8(1)(h.1)
• Not limited to an amount
• Limited to general or motor vehicle travelling
  expenses

OR
AND
8(1)(i) Dues and other expenses 8(1)(j) Motor
vehicle and aircraft costs, including i)
Interest on funds borrowed ii)Capital Cost
Allowance
16
Motor Vehicle Expenses Lease Costs

• Lesser of
• a) (A x B) / 30 C D E
• b) (F x G) / .85H D E
• A Dollar monthly maximum, as prescribed - 800
  after 2000
• B Number of days vehicle was leased for all
  years to the end of the present year
• C Aggregate of lease costs deducted in all
  preceding years
• D Imputed interest, at prescribed rate, on
  refundable amounts over 1,000
• E Total reimbursements receivable in respect of
  the lease in year
• F Total Lease charges payable (incl. GST and
  PST) for the year
• G Dollar maximum capital costs prescribed
  30,000
• H Greater of a) 100/85
  30,000(1PSTGST).
• b) Manufacturers list price

17
Work Space in HomeSsec. 8(13)

• Deduction permitted if work space is
• A) the place where the individual principally (gt
  50) performs job, or
• B) i) used exclusively for the purpose of earning
  employment income during the period and,
• ii) used on a regular and continuous basis for
  meeting customers or other persons in the
  ordinary course of performing job
• Includes deductions for supplies, property taxes
  and insurance paid on home but not mortgage
  interest

18
Work Space in HomeSsec. 8(13)

• The deduction cannot exceed the income from
  employment and
• Any amount not deducted in a year can be carried
  forward indefinitely subject to income from
  employment for the taxation year