Tax tips for commuters

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Why read this?

Your client:

• takes public transit,
• drives to client meetings or worksites, or
• has moved closer to work.

1 Claim the public transit tax credit

It’s a 15% non-refundable tax credit, and expenses must be claimed in the tax year in which they were incurred, says Claudio Saverino, senior manager, Tax, at BDO Canada in Markham, Ont.

If your client travels by bus, streetcar, subway, commuter train or ferry, her public transit costs are eligible if she uses:

› an unlimited ride pass;

› within a 28-day period, 20 days’ worth of short-term passes entitling her to at least five days of consecutive travel per pass; or

› an electronic pass to make at least 32 one-way trips during 31 days from a transit authority that records usage and issues a receipt.

Tip

Your client can claim her spouse or common-law partner’s passes and the passes of her children under 19. The spouse or child can’t have claimed the credit on their returns (see “Transit pass receipts,” below).

a If your client pays for her own passes, enter the total cost on Line 364 of Schedule 1 Federal Tax.

b If your client’s employer pays for her passes, it’s a taxable benefit. Since your client must include it in her income, she can claim the transit credit, says Saverino.

› Enter the amount from Box 84 of your client’s T4 Statement of Remuneration Paid on Line 364.

Claim these vehicle expenses

• Fuel
• Maintenance and repairs
• Insurance
• License and registration fees
• Capital cost allowance (30% for Class 10 or 10.1)
• Interest on a loan to buy a vehicle
• Leasing costs

2 Claim work-related car expenses

12%

Commuters who take public transit to work.

Source: Statistics Canada National Household Survey (2011)

a If your client usually works away from her employer’s place of business, or in different places, and she doesn’t get an expense allowance from her employer, she can claim her car expenses. (See “Claim these vehicle expenses,” above.)

i Ask her employer to complete Form T2200, Declaration of Conditions of Employment. Keep this in case CRA asks.

ii That will help her complete Form T777 Statement of Employment Expenses. Enter the total on Line 229 of the return.

iii Submit T777 with your client’s return.

TIP

If your client’s moving expenses exceed her eligible income earned in her new job that year, she can carry forward unclaimed expenses and deduct them in the next year; but expenses can’t be carried back.

b If your client gets a vehicle allowance, it isn’t taxable as long as it’s based on a reasonable per-kilometre rate, says CRA. That rate for 2015 is up to 55 cents per kilometre for the first 5,000 kilometres, and 49 cents after that.

› If your client’s allowance doesn’t cover her expenses, declare the allowance as income on Line 104 of the return and then claim all her expenses, says Duncan Peake, partner at Chaggares and Bonhomme in Newmarket, Ont.

• The cost of driving to and from work isn’t deductible.
• Your client must keep all receipts and a record of total kilometres driven to earn income, as well as the date, destination and purpose of the trips.

Transit pass receipts

The pass itself is a receipt if it states the:

• period for which it’s valid;
• name of the transit authority;
• amount paid; and
• rider’s identity.

If the pass doesn’t state that information, your client should collect her receipts, along with cancelled cheques or credit card statements, along with the passes. Your client doesn’t have to submit her passes or receipts with her return, but she should keep them in case CRA asks for them.

Sources: CRA, Metrolinx

3 Claim moving expenses

If your client has moved at least 40 kilometres closer to a new place of work, she can claim the moving expenses deduction.

› Complete Form T1-M, Moving Expenses Deduction. Enter the total on Line 219 of the return.

Don’t deduct expenses that are reimbursed by her employer (see “Deductible moving expenses,” below).

Deductible moving expenses

• Transportation and storage costs, including insurance, packing, movers and hauling.
• Travel expenses, including vehicle expenses, meals and accommodation, to move your client and her household.
• Temporary living expenses, up to 15 days, for accommodation and meals for your client’s household.
• Lease cancellation expenses for an old residence.
• Incidental costs, such as fees to change an address, replace drivers’ licenses or hook up utilities.
• Cost of maintaining your client’s old residence (up to $5,000) until it sells.
• Cost of selling your client’s old residence.
• Cost of buying your client’s new residence (e.g., legal fees, taxes for the property title transfer or registration).

Source: CRA

Sources: Claudio Saverino, CPA, CA, senior manager, Tax, at BDO Canada in Markham, Ont.; CRA; Duncan Peake, MBA, CPA, CA, partner, Chaggares and Bonhomme in Newmarket, Ont.