Commission employees who receive a T4 with commission income can deduct all of the following that a salaried employee can, plus additional items:
| Deduction | Salaried Employee | Commission Employee |
|---|---|---|
| Motor vehicle expenses | Yes (T2200) | Yes (T2200) |
| Home office expenses | Yes (T2200) | Yes (T2200) |
| Advertising & promotion | No | Yes |
| Meals & entertainment (50%) | No | Yes |
| Assistant's salary | No | Yes |
| Professional liability insurance | No | Yes |
| Legal fees (income collection) | No | Yes |
Employee vs. Self-Employed: Which Are You?
Many commission-based workers are self-employed, not employees. The tax forms and deduction rules differ:
| Indicator | Employee | Self-Employed |
|---|---|---|
| Tax slip received | T4 (with commission in Box 42) | T4A or no slip (invoice-based) |
| CPP and EI deducted at source? | Yes | No (pay self-employment CPP on T1) |
| Expense form | T777 with T2200 | T2125 directly |
| GST/HST registration | Not required | Required at $30,000 revenue |
| Examples | Employed sales rep, bank-employed advisor | REALTOR associated with brokerage, independent insurance broker |
The vast majority of Canadian real estate agents are independent contractors of their brokerage, not employees. They receive T4As (or no slips) and file T2125. Their deductions are essentially the same as described below, but filed on T2125 rather than T777. If you receive a T4 with Box 42 commission income from your brokerage, you are an employed agent. If you pay your brokerage a fee and receive what you bill, you are self-employed.
The rest of this guide applies to commission employees with T4 income and Box 42 commission amounts. Self-employed commission earners should consult our Self-Employed Deductions guide as the principle is the same but the filing process differs.
1. Motor Vehicle Expenses
For most commission employees, motor vehicle expenses are the largest deduction. If your T2200 confirms that you are required to use your personal vehicle for work, you can deduct the employment-use percentage of:
- Fuel and oil
- Insurance premiums
- Maintenance and repairs
- Licence and registration fees
- Lease payments (if leased)
- Loan interest (limited to $10/day for the employment-use portion)
- Capital Cost Allowance (CCA) — Class 10 (30%) or 10.1 (30%)
- Parking at client sites (not at your employer's office)
Calculating employment-use percentage
Keep a mileage logbook. Employment use % = kilometres driven for work ÷ total kilometres driven in the year. A sales rep driving 25,000 km/year with 18,000 km for client visits has 72% employment use.
| Example annual vehicle costs | Employment use 72% | Deductible amount |
|---|---|---|
| Fuel: $3,500 | 72% | $2,520 |
| Insurance: $2,200 | 72% | $1,584 |
| Maintenance: $1,200 | 72% | $864 |
| Lease: $7,200/yr | 72% | $5,184 |
| Total vehicle deduction | ~$10,152 |
2. Home Office Expenses
Commission employees who are required by their employer to maintain a workspace at home can deduct costs for the portion of the home used exclusively and regularly for work. The T2200 must confirm this requirement.
Deductible home office costs for commission employees (more extensive than for salaried employees) include:
- For renters: a portion of rent, heat, electricity, internet
- For homeowners: heat, electricity, water, home insurance, property taxes, mortgage interest (the last two are available only to commission employees — salaried employees cannot deduct insurance and property taxes)
- Maintenance related to the workspace
- Office supplies used in the workspace
Calculate the home office percentage as: (square footage of workspace) ÷ (total square footage of home).
Unlike salaried employees, commission employees can deduct home insurance premiums and property taxes (for homeowners) as part of their home office expenses. A real estate agent homeowner paying $5,000 in property taxes with a 15% home office ratio can deduct $750 in property taxes alone — something a salaried employee in the same home cannot do.
3. Advertising and Promotion
This is a deduction exclusive to commission employees (not available to salaried employees). If you incur advertising costs to earn commission income, they are deductible:
- Real estate listing signs, "for sale" boards, open house materials
- Business cards, promotional flyers
- Website costs and digital advertising (if required by the employer and not reimbursed)
- Promotional gifts to clients (within reasonable limits)
- Referral fees paid to other sales professionals
- Sponsorships of events for business development
4. Meals and Entertainment (50%)
Commission employees can deduct 50% of meals and entertainment expenses incurred directly to earn commission income. Examples:
- Lunches with prospective clients or current clients to discuss sales
- Event tickets given to clients for relationship-building
- Golf games with clients (50% of all related costs)
For every entertainment expense, CRA expects you to record: date, amount, person(s) entertained, business purpose. A restaurant receipt alone is not sufficient — the note on the back listing the client name and purpose is what matters most.
5. Professional Liability Insurance Premiums
Insurance required to earn commission income is deductible for commission employees. Examples:
- Real estate errors and omissions (E&O) insurance required by RECO
- Insurance agent professional liability insurance required by FSRA (Financial Services Regulatory Authority of Ontario)
- Sales-related liability coverage required by the employer
6. Professional Fees and Licences
Association memberships and regulatory fees required to earn commission income are deductible:
- Real estate agents: RECO registration fee, local real estate board membership (e.g., TRREB), CREA membership, MLS access fees
- Insurance agents: RIBO (Registered Insurance Brokers of Ontario) fees, FSRA licence fees
- Financial services sales reps: MFDA or IIROC dues, CFP licence renewal, provincial securities licence fees
- General: Professional development courses required for licence maintenance
7. Salary Paid to an Assistant
Commission employees who employ an assistant (e.g., a real estate agent's licensed administrative assistant) can deduct the salary paid as an employment expense. Requirements:
- The assistant must actually work and be paid
- You must deduct and remit CPP and EI on the assistant's behalf (as their employer)
- The assistant's work must be required to earn your commission income
- The T2200 from your own employer must confirm you are permitted to hire an assistant
8. Legal Fees for Collection
Legal fees incurred to collect commission income that was owed but withheld are deductible as employment expenses. For example, if a client fails to close a real estate transaction and disputes your commission entitlement, legal fees to collect the commission are deductible.
9. Capital Cost Allowance on Equipment
Commission employees who purchase certain equipment required for their work (laptop, tablet, smartphone — if confirmed on T2200) can claim CCA at the applicable rate. Class 8 (20% declining balance) for most equipment, Class 50 (55%) for computer equipment. Only the employment-use proportion of CCA is deductible.
Documents and Forms Checklist
| Document | Source | Used For |
|---|---|---|
| T4 with Box 42 commissions | Employer | Employment income and commission income |
| T2200 signed by employer | HR or manager | All T777 employment expenses |
| Mileage logbook | Your records | Vehicle employment-use percentage |
| Vehicle expense receipts | Gas stations, insurers, mechanics | Motor vehicle expenses |
| Home office expense receipts | Utility bills, insurance, property tax notice | Home office deduction |
| Advertising receipts | Printers, digital platforms, suppliers | Advertising and promotion |
| Entertainment log | Your records (who, what, purpose) | Meals and entertainment (50%) |
| Professional fee receipts | RECO, TRREB, CREA, RIBO, etc. | Professional fees deduction |
| Insurance premium receipts | E&O insurer | Liability insurance deduction |
Common Mistakes Commission Employees Make
- Not maintaining a mileage logbook: The vehicle deduction is often the largest single deduction. Without a logbook, CRA will disallow it entirely. A simple phone app (MileIQ, Driversnote) makes this effortless.
- Claiming 100% of entertainment: Only 50% of meals and entertainment is deductible. Claiming 100% is a common audit trigger.
- No business purpose noted on entertainment receipts: CRA expects to see who you entertained and why. Write it on the back of the receipt or in a log.
- Not claiming the expanded home office deduction: Commission employees can deduct property taxes and home insurance on their home office — salaried employees cannot. Many commission workers file as salaried workers and miss this.
- Self-employed REALTORs using T777 instead of T2125: If you are self-employed (T4A or no slip), your expenses go on T2125, not T777. You also need to register for HST and remit/claim ITCs.
Calculate your 2025 tax as a commission earner
Enter your commission income and estimated expenses — see your Ontario tax and net refund or balance owing.
Frequently Asked Questions
What makes commission employees different for tax purposes?
Commission employees who earn commission income can deduct advertising and promotion, meals and entertainment (50%), professional liability insurance, assistant salaries, and legal fees for income collection — none of which are available to salaried employees. Both types of employees can deduct vehicle and home office expenses with a T2200.
Can real estate agents deduct licensing and association fees?
Yes. RECO registration, board membership (TRREB, etc.), CREA membership, and MLS access fees are deductible as employment expenses (if an employed agent with T2200) or as self-employment expenses on T2125 (if a self-employed contractor). Professional liability insurance (E&O) is also deductible.
Is a real estate agent an employee or self-employed?
Most REALTORs in Canada are self-employed independent contractors of their brokerage. They receive T4As or invoice their brokerage and file a T2125. Some agents are genuinely employees of their brokerage and receive a T4 with Box 42 commission income. If you receive a T4 with CPP and EI deducted, you are an employee. If you pay your brokerage fees and keep the remainder, you are self-employed.
Can commission employees deduct home office expenses?
Yes — and more than salaried employees can. In addition to heat, electricity, and rent/mortgage interest, commission employees can also deduct home insurance premiums and property taxes on the workspace portion. A T2200 confirming the employer requires home-based work is still required.
Are meals and entertainment deductible for commission employees?
Yes, at 50%. Meals and entertainment directly incurred to earn commission income are 50% deductible. Keep records of who you entertained, the date, amount, and business purpose. Regular salaried employees cannot deduct entertainment costs at all — this is a commission-employee-exclusive benefit.