If you incur out-of-pocket work-related expenses as employee or partner, you can deduct the expenses on your income tax return. In addition to the deduction, you may also be eligible to claim a GST/HST (Goods and Services Tax and Harmonized Sales Tax) rebate on many of the same expenses. The GST/HST rebate is often overlooked.
In order for you to quality for the rebate, your employer or partnership must be registered for GST/HST purpose. And you will not qualify if your employer is a listed financial institution, such as a bank, an investment dealer, a trust company, an insurance company, a credit union, or a corporation whose principal business is lending money. And generally employees of health care providers and non-profit organizations are not eligible either.
If your employer or partnership reimburse you or pay you reasonable allowance for your work-related expenses, you can neither claim the expenses deduction nor the employee and partner GST/HST rebate unless the reimbursement or allowance is added in your income.
Only expenses on which you paid GST/HST are eligible for GST/HST rebate. Common eligible expenses are:
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- Accounting and legal fees
- Advertising and promotion
- Apprentice mechanic tools
- Artists’ employment expenses
- 50% of food, beverage, and entertainment
- Musical instrument expenses
- Supplies
- Union and professional dues
- Automobile (including capital cost allowance) expenses such as parking, fuel and repairs
Expenses on which you did not pay GST/HST are not eligible for the GST/HST rebate. Such expenses include auto insurance and licenses and registration, health care services, most educational services, mortgage interest, residential rents, etc.
Use Form GST370, Employee and partner GST/HST rebate application to claim the GST/HST rebate. Form GST370 should be filed with your income tax return for the year in which you deduct the corresponding expenses for income tax purpose. If you do not file your rebate application with your income tax return, you have up to four years from the end of the year to which the expenses were incurred to file an application.
The amount of rebate is claimed on line 457 on your tax return.
Ensure your employer will sign form GST370 and parovide you with a T2200, Declaration of conditions of employment, if CRA asks for it.
The GST/HST rebate will first used to reduces your income taxes otherwise payable and refund to you if there is any remaining.
Although the rebate amount is subsequently added into the income in the year received, and taxed, there is certainly a benefit to making the claim.