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Nov 20, 2019 · The Canada Revenue Agency (CRA) allows self-employed Canadians to write-off expenses reasonably incurred while pursuing profit for your business. This includes expenses such as phones, internet and utilities. To deduct your cell phone as a business expense, note your costs on Form T2125, Statement of Business and Professional Activities.
- On this page
- Determine if the benefit is taxable
- Calculate the value of the benefit
- Withhold payroll deductions and remit GST/HST
- Report the benefit on a slip
- References
•Determine if the benefit is taxable
•Calculate the value of the benefit
•Withhold payroll deductions and remit GST/HST
•Report the benefit on a slip
Generally, cell phones and internet services you provide to your employees are taxable. Depending on your situation, the benefit may not be taxable under the CRA's administrative policy .
Situation: Allowances you provide to your employees for cell phone and internet services
The CRA's administrative policy does not apply if you give your employees an allowance for cell phone and internet services. The benefit received is always taxable.
To calculate the benefit, refer to: Calculate the value of the benefit.
Situation: Cell phones you provide to your employees
Under the CRA's administrative policy, if you provide your employee with a cell phone (or other handheld communication device) that you own and you require your employee to use the cell phone as part of their employment duties, the fair market value (FMV) of the cell phone or device is not a taxable benefit.
If the benefit is taxable, the value of the benefit is equal to the fair market value (FMV) of:
•Employee's personal use of cell phone or the cell phone service plans
•+plus Employee's personal use of internet service plans
•-minus Any amounts your employee reimburses you
•=eqauls Value of the benefit to be included on the T4 slip
The business use portion of the service is not a taxable benefit.
Non-cash and near-cash: Option 1
Withhold: Income tax CPP EI (do not withhold) Remit: GST/HST in certain situations
Cash: Option 2
Withhold: Income tax CPP EI Do not remit: GST/HST The amounts must be included in the pay period they were received or enjoyed. Learn how to calculate deductions and the GST/HST to remit on benefits: How to calculate – Calculate payroll deductions and contributions.
Non-cash and near-cash: Option 1
Report on: Box 14 – Employment Income Box 26 – CPP/QPP pensionable earnings Code 40 – Other Information
Cash: Option 2
Report on: Box 14 – Employment Income Box 24 – EI insurable earnings Box 26 – CPP/QPP pensionable earnings Code 40 – Other Information Learn how to report the benefit on a slip: Fill out the slips and summaries – File information returns (slips and summaries).
Legislation
ITA: 6 Amounts to be included as income from office or employment ITA: 6(1)(a) Value of any benefit is to be included as income from office or employment ITA: 6(1)(b) Allowance for any purpose CPP: 12(1) Amount of contributory salary and wages ETA: 173 Taxable benefit is considered a supply for GST/HST purposes IECPR: 2(1) Amount of insurable earnings IECPR: 2(3) Earnings from insurable employment IECPR: 2(3)(a.1) Earnings from insurable employment – amount excluded as income under 6(1)(a) or (b), 6(6) or (16) of the ITA
- Keeping records. You have to keep records for each year you claim expenses. These records must include all of the following: a daily record of your expenses, together with your receipts and any cancelled cheques.
- Employees earning commission income. This chapter describes the expenses you can deduct if you earn commission income. If you earn a salary, read Chapter 3.
- Employees earning a salary. This chapter describes the expenses you can deduct if you earn a salary. If you earn commission income, read Chapter 2.
- Transportation employees. In addition to the expenses listed in Chapter 3, you may also be able to claim the cost of meals and lodging (including showers) if you are an employee of a transport business, a railway employee, or other transport employee.
If your employer requires you to pay for office supplies or certain phone expenses, you may be able to claim those expenses. Although you can claim these expenses, they are not related to the physical work space in your home.
Computers, cell phones, and other equipment - You can deduct the part of the airtime expenses for a cell phone that reasonably relates to earning your employment income. However, you cannot deduct amounts you paid to connect or license the cell phone or the cost of fees for Internet service.
Sep 2, 2022 · If you’re using a cell phone for both business and personal use, you can only claim the portion that relates to your business use. When you claim these, you need to file them as a “business use of home expense.”
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Jun 11, 2024 · Wondering if you can deduct cell phone costs on your Canadian taxes? You've come to the right place. This guide breaks down everything you need to know about claiming cell phone expenses in Canada for both employees and self-employed individuals.
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