Income Tax Guide To: Commission-Based Incomes

Canada Revenue Agency (CRA) has many provisions in place for contractors, small business and the self-employed– but if you are considered an employee, it may be more difficult to qualify. Luckily for commission-based employees, there are conditions that ensure they can claim similar deductions against their income tax. Read the guide below for a summary of the requirements and benefits for commission-based employees.

 

AM I ELIGIBLE?

The following is directly quoted from the CRA website:

“To deduct employment expenses you paid to earn commission income, you have to meet all of the following conditions:

  • Under your contract of employment, you had to pay for your own expenses.
  • You were normally required to work away from your employer’s place of business.
  • You were paid in whole or in part by commissions or similar amounts. These payments were based on the volume of sales made or the contracts negotiated.
  • You did not receive a non-taxable allowance for travelling expenses. Generally, an allowance is non-taxable as long as it is a reasonable amount. For example, an allowance for the use of a motor vehicle is usually non-taxable when it is based solely on a reasonable per-kilometre rate.
  • You keep a copy of Form T2200, Declaration of Conditions of Employment, which has been completed and signed by your employer.”

If you do not fit the criteria above, you do not qualify for any additional tax benefit.

 

WHAT CAN I CLAIM?

Income tax credits for eligible commission-based employees are very wide-ranging. Here are just a few of the deductible expenses that may be available to those types of employees:

  • Legal & accounting fees
  • Promo & advertisements
  • Vehicle expenses
  • Meals & entertainment
  • Travel costs
  • Supplies, gear & equipment
  • Staff, office space & training
  • Licenses & permits

 

Depending on your line of work, some or all of these items may be entitled to a full or partial tax credit. Examine your expenses closely and you will enjoy the best possible tax return.

The above guidelines only address a portion of the requirements and credits for those whose income is commission-based. For more details, consult the CRA website or your Liu & Associates financial expert. We can help ensure that even though you qualify as an employee, you will still have a maximized tax return every year.