Taxpayer with more expenses than income not allowed to carry them forward

financialpost.com:

If you 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 them. But what if your expenses are so large that they exceed your employment income? Are they still deductible against other income? Or can they be carried forward, and used in a future year?

That was the issue in a recent tax case decided earlier this month involving a Montreal investment adviser. But before delving into the details of this case, let’s review the basic rules regarding the deductibility of employment expenses.

To be entitled to deduct unreimbursed employment expenses, an employee needs to obtain a copy of a properly completed and signed Canada Revenue Agency Form T2200, Declaration of Conditions of Employment from their employer. A new and simplified version of this CRA form for the 2024 tax year was just released this week (more about that in a future column).

Typical deductible employment expenses (if unreimbursed) for salaried employees can include: allowable motor vehicle expenses, out-of-town travel expenses, parking (other than at your employer’s place of business), office supplies, salary for an assistant (if required by your employer), office rent, and home office expenses.

For salaried employees, if the allowable employment expenses are greater than the associated employment income, the net result is an employment loss, which can be applied against any other source of income for the year. And, if not used in the current year, it can be carried over to another year as a non-capital loss.

Employees who receive part of their compensation in the form of commissions, however, can deduct a broader range of “sales expenses.” These