9 June 2010 External T.I. 2010-0365351E5 - Employment Expenses

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Deductibility of certain expenses.

Position: Very general comments.

Reasons: Question of fact.

XXXXXXXXXX 

                                          2010-036535
                                          Michael Cooke, C.A.
June 9, 2010

Dear XXXXXXXXXX :

Re: Tax Guide T4044 Rev. 09 and Tax Form T1-M (09)

This is in response to your letter of April 7, 2010, wherein you suggested that the above-noted publications should contain examples for the situations described in your letter.

We appreciate the suggestions you have made and copy of your letter was sent to the area responsible for these publications for consideration. However, please keep in mind that while the above-mentioned publications, as well as other CRA publications, contain useful information on the deductibility (or non deductibility) of various expenses incurred by employees, it is not possible to provide an exhaustive list of each type of expense that might be deducted in every fact situation. You can also use the search feature on the CRA's website to find general information on many of the topics raised in your letter.

Generally speaking, under the Income Tax Act (the "Act"), in order for an outlay or expenditure to be deductible in computing employment income, the particular expenditure must be reasonable, must have been incurred for the purpose of earning such income and its deduction must be specifically permitted by the rules in section 8 of the Act. Moreover, subject to specific and limited exceptions, an employee is generally not able to deduct the capital cost of equipment that may have been acquired for use in connection with employment.

We would also note that although the Act is somewhat restrictive with respect to the deduction of specific employment expenses, subsection 118(10) of the Act provides a non-refundable tax credit called the Canada Employment Credit. First effective in 2006, this credit recognizes that employees often incur various work related expenses. There is no requirement that a specific employment expense be proven. Rather, the credit is simply calculated as the lesser of an indexed amount ($1,050 for 2010) or the total of all income from office or employment for the year (not including any deductions under section 8 of the Act) multiplied by the appropriate percentage for the year. For 2010, this percentage is 15%.

We trust that these comments have been of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch