No matter the size and sector of your company, its operation inevitably involves expenses. In some cases, your employees may even have to advance certain amounts. However, these expenses may sometimes be tax deductible.
Here are some examples of tax-deductible employee expenses and the conditions that must be met in order for you to receive credits on them.
What expenses incurred by your employees are tax deductible?
According to the Canada Revenue Agency (CRA), any reasonable expense incurred by your employees to earn income is potentially tax deductible. Without being exhaustive, the list of tax-deductible expenses may include:
- Supplies: Depending on your business, you might be able to deduct the cost of equipment that your employees use indirectly to produce goods or services.
- Office expenses: expenses allocated to office equipment (pens, stationery, stamps, etc.) are tax deductible.
- Travel expenses: if your employees have to travel, for example, to meet a customer or for training, travel expenses can also be deducted from your company's taxes.
Tax-deductible employee expenses are numerous and varied. You may want to ask an accountant for help to find out all the deductions you are entitled to.
How to make your employees benefit from a tax deduction on a company's expenses
Employees of a company who are required to advance tax-deductible expenses related to their professional activities can then claim a refund from their company's accounting department, but under certain conditions.
Request a reasonable refund
If your employees have to advance certain expenses, they could be tax deductible, but this will depend on the context and nature of the expense. For example, an employee may claim a refund for business travel, but at an appropriate rate. For example, first-class air travel may not be considered fully deductible and the deduction may instead be based on a rate set by the government (generally Air Canada Economy Class).
Proof is required to obtain a deduction
The golden rule when it comes to refunds or tax deductions is to provide supporting documents. For example, if you want to benefit from a tax deduction on expenses incurred by your employees in the course of their work, you will have to provide a receipt for the full amount you claim. It is therefore essential to ensure that your employees provide you with proof of payment. Most of the time, a simple invoice is enough.
Maximize the tax credits applicable on employee expenses
In order to properly manage the reimbursement of expenses advanced by your employees, you should have a well-organized accounting system and know the deductions you are entitled to claim.
At T2inc.ca, we use our in-depth knowledge of corporate taxation to help businesses streamline their accounting processes and file their corporate tax returns. Do you have a question about reimbursement claims from your employees? Contact us, our team will be happy to help you.
Frédéric Roy-Gobeil
CPA, M. TAX
As President of T2inc.ca and an entrepreneur at heart, I have founded many start-ups such as delve Labs and T2inc.ca. A former tax specialist at Ernst & Young, I am also a member of the Ordre des comptables professionnels agréés CPA and have a master's degree in taxation from the Université de Sherbrooke. With a passion for the world of entrepreneurship and the growth mindset, I have authored numerous articles and videos on the industry and the business world, as well as on accounting, taxation, financial statements and financial independence.
