Principal Issues: Whether various expenses incurred by an employee and related to a workspace in the home are deductible employment expenses. More specifically, the expenses incurred are a second telephone line, an unlimited long distance plan, monthly internet access fees and gas, hydro and water charges.
Position: Pursuant to subparagraph 8(1)(i)(iii), the expenses incurred by a salaried employee for a second telephone line and a monthly internet access fees are not deductible but that portion of the cost for a telephone plan for unlimited long distance that reasonably relates to the earning of employment income is deductible. Pursuant to paragraph 8(1)(i), a reasonable proportion of expenses paid for the maintenance of the home such as the cost of fuel, electricity and water charges will be deductible.
Pursuant to subparagraph 8(1)(f), if all the preliminary requirements are met, all the enumerated expenses are deductible for an employee earning commission income.
Reasons: The expenses incurred for a second telephone line and monthly internet access fees are not deductible under 8(1)(i)(iii) as they are not supplies consumed directly in the performance of duties of employment. The cost for an unlimited limited long distance plan qualifies as office supplies consumed insofar as the expenses relate to employment-related calls. For the cost of fuel, electricity, the CRA's position is expressed in guide T-4044.
While some other provision of the Act may restrict the deduction (e.g. section 67), if it can be established that the expenses are paid by an employee in a taxation year for the purpose of earning income from a commission sales employment, and all the requirements of subparagraphs 8(1)(f)(i) to (iv) are met, paragraph 8(1)(f) would not specifically deny their deduction unless the amount represents a payment on account of capital.
