Question

Ronald Smith is an employee of locally owned corporation. He works in their Baden office and lives in a bungalow in the surrounding area. His earns a modest salary of $75,000 for the working for this company.

Other employment related information is as follows:

1. Ronald’s employer requires him to pay all his employment related expenses, as well as provide his own office space. Ronald has the required Form T2200 from his employer which states that he needs to work from home 100% of his time. Part of his job is to visit clients.

1. He also has the following employment expenses:

• Parking                        $125.00

• Office Supplies           565.00

• Postage                            75.00

1. For his employment related travel, Ronald drives a car that he purchased on January 1, 2019 for $36,500, including HST. During 2019, he drives 32,000 kms, of which 20,800 are employment related. Ronald had financed the car with a loan from a local bank and, during 2019, he had paid interest of $2,750.

1. The costs of operating the car during 2019 was $10,430. This is made up of the following:

• Gas and Oil                 $8,035

• Repairs                        1,025

• Insurance                     1,250

• License                             120

           

1. Ronald uses 35 percent of his personal residence as an office. During 2019, the cost associated with his home were as follows:

Interest amount                                               $ 7,050

Property Taxes                                                    2,950

Utilities                                                               2,225

Insurance                                                             1,060

Painting and updating rooms                              3,200

Total                                                                $16,485

Required:

Calculate Ronald’s employment-related expenses that can be deducted on his personal taxes by filling out the T777 form for Ronald.

For further information about this sum is the " T777 Form 1 ". I have tried to upload the form but it is not allowed to upload the file.

Answer 1

Statement of employment related expenses - Form T777

1. Allowable motor vehicle expenses (as per woring note-1) $11,524.50

2. Parking expenses $ 125.00

3. Office supplies $ 565.00

4. Postage $ 75.00

Sub total $12,289.50

Add: work-space-in -the-home expenses (as per working note-2) $ 1,898.75

Total expenses $14,188.25

Working note - 1 - Calculation of allowable motor vehicle expenses

The make,model and year of motor vehicle used to earn employment income - 1st Jan 2019

Kms used for official purpose in the year - 20,800Kms

Total Kmsdrove during the tax year - 32,000 kms

The cost of operating car during 2019 - $10,430

Add: Capital cost allowance = cost of vehicle * 20% (Depreciation)= $36,500*20% - $ 7 ,300

Sub total = $17, 730

So, allowable motor vehicle allowance is = 20,800/32,000*17,730 = $11,524.50

Working Not -2 - Calculation of work space in the home expenses

*Insurance, Interest & Property tax will be allowable to commission employees only

Utilities - $2,225

Painting & updating room - $3,200

Subtotal $5,425

For Official use is 35% = $5,425*35% = $1,898.75