If you’re an employee who’s in the process of preparing their 2023 tax return, you’ll no doubt soon come to realize that there’s not much tax planning we can do to reduce the tax payable on our employment income, all of which appears on a T4 slip.

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But if you do incur various expenses for which you aren’t reimbursed by your employer, including expenses for a home office, you may be able to claim a deduction on your return for such expenses.

Typical deductible employment expenses (if unreimbursed) can include: certain food, beverage and entertainment expenses; out-of-town lodging; parking; office supplies; allowable motor vehicle expenses; and even advertising and promotion expenses. Of course, to be entitled to deduct employment expenses, an employee needs to obtain a copy of a properly completed and signed Form T2200, Declaration of Conditions of Employment from their employer.

A tax case decided in March involved the deductibility of employment expenses, specifically, those related to the use of a home office and a motor vehicle. The taxpayer was appealing reassessments of his 2015, 2016, 2017 and 2018 taxation years in which the Canada Revenue Agency reduced or denied certain expenses claimed in each of those years.

The taxpayer, a visiting registered nurse, was simultaneously employed by four separate employers in 2015 and three separate employers in 2016, 2017 and 2018. His job was to provide nursing services to individuals in their own homes, or in a retirement or nursing home. During the tax years under review, he provided nursing services six days one week and four days the next week on a rotating basis. Each week included two or three seven-hour night shifts during which he was on standby for patients who required urgent care.

The night before each workday, his employers would provide a schedule of the patients he was to visit the following day. The taxpayer estimated he visited between 10 and 30 patients during a day shift, and he worked an average of 40 to 45 hours per week, plus the two to three seven-hour night shifts.

Each employer paid the taxpayer a fixed amount for each patient visit, regardless of the nursing services provided. He travelled daily from his south-central Ontario community to visit patients in the Greater Toronto Area. As his various employers didn’t provide him with a place to work, he maintained a home office in his basement, with a fax machine and office supplies, where he held telephone consultations with other medical professionals (for example, doctors) regarding patients, stored medical supplies provided by his employers, and stored the medical records of patients under his care.

To support his claim for home office and vehicle expenses, he submitted copies of the T2200 forms issued by his various employers for each of the taxation years under review, which showed varying percentages of home-office use, from a low of 15 per cent for one employer and “up to 50 per cent” for another, depending on the tax year.

To be entitled to deduct home-office expenses, an employee must be “required by the contract of employment” to maintain such an office as certified by the employer on the T2200. It must also be either where the employee “principally” (more than 50 per cent of the time) performs their duties of employment or, alternatively, used exclusively to meet customers on a regular and continuous basis in the course of employment. (Note that for the 2023 tax year, the CRA said you can claim home-office expenses if your home workspace is where you principally worked for a period of at least four consecutive weeks during 2023.)

The taxpayer argued that since the percentages issued by his employers on the T2200s added up to more than 50 per cent in total, he ought to be allowed to write off his home-office expenses. The CRA disagreed, saying the use of a home office must be determined for each employment, and the percentage of use for each of the separate employments in issue “cannot be simply added together.”

The judge agreed, noting that “based on the T2200s, the total home-office activity would always be 50 per cent or less of all relevant activity because at no time does the percentage of home-office activity for an employer exceed 50 per cent of total activity.” In addition, due to the nature of the taxpayer’s employment activities (caring for patients in their home or in a nursing or retirement home), this “strongly suggests that the greater part of the taxpayer’s employment activities do not take place at his home office. Rather, the taxpayer’s use of his home office is ancillary to and in support of the performance of his nursing duties at other locations.”

The taxpayer also deducted various automobile expenses in each year, which were denied. Under the Income Tax Act, to be able to deduct vehicle expenses as an employee, you must normally be required to work away from your employer’s place of business or in different places, and you must be required to pay your own automobile expenses, as certified on the T2200.

In addition, you must not be the recipient of a “non-taxable” allowance for motor vehicle expenses. An allowance is considered non-taxable when it is solely based on a “reasonable” per-kilometre rate. (For 2023, the Canada Revenue Agency considers a reasonable rate to be 68 cents per kilometre for the first 5,000 kilometres driven, and 62 cents/km after that. In the territories, the rate is four cents/km higher.)

The taxpayer may have been entitled to claim some of these as valid expenses, but he was unable to supply any evidence to back up the expenses he had claimed. He testified he had previously provided the records to the CRA by registered mail, but the CRA never received them, and he was unable to provide any backup documentation in court.

This proved to be fatal for the taxpayer’s claim. “Maintaining books and records is an ongoing obligation in a self-assessing system and the taxpayer’s failure to do so … made it impossible for him to meet the evidentiary burden…to demolish the (CRA’s) assumptions” about the denied expenses,” the judge said citing a prior case.

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Estate Planning with CIBC Private Wealth in Toronto. Jamie.Golombek@cibc.com.

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