Deducting commuting costs

Commuting can be logistically cumbersome, not to mention time-consuming and costly.

This financial burden would be largely alleviated if it could be presented as tax deductible. For Ian Brown, a pilot with 2,500 kilometres between his home in Calgary and his home-base tarmac in Los Angeles, that would be welcome news — to the tune of more than $16,000.

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The long commute

Brown was a captain with Cathay Pacific Airways, most often flying the route between Los Angeles and Hong Kong. To live in Los Angeles he would have needed employer sponsorship to qualify for a United States green card or, alternatively, a visa under the Diversity Visa Program. At the time, Cathay Pacific did not provide such sponsorship.

The airline did have home bases in Vancouver and Toronto, but Brown did not have sufficient seniority to qualify to work out of either location. Presumably he would have been willing and able to move had he qualified.

As it was, Brown traveled to Los Angeles, conceding to the judge in the course of an informal procedure at the Tax Court that these were commuting costs to get to his place of employment.

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In search of an exception

Deductibilty of travel expenses

section 8(1)(h) of the Income tax act allows for the deductibility of travel expenses where an employee:

• Was ordinarily required to carry on the duties of the office or employment away from the employer’s place of business or in different places, and
• Was required under the contract of employment to pay the travel expenses incurred by the taxpayer in the performance of the duties of the office or employment.

The cost of getting to and from work is not deductible.

Were Brown’s travel costs deductible (see “Deductibility of travel expenses,” right)? The judge considered whether the immigration restrictions might provide Brown with an exception to the commuting rule. Brown contended he had no choice but to live in Canada.

While acknowledging the predicament, the judge nonetheless found that it remained a personal choice. Further, since Brown performed no employment duties during the course of the commute, this avenue was not available to him.

Brown’s last hope was to ask the court to follow an earlier judgment of the Tax Court that allowed a pilot in a similar situation to deduct travel costs to reach a home base destination outside of Canada.

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Unlike informal procedure hearings — like the one Brown was involved in — the earlier judgment was conducted under the general procedure, and therefore had potential precedential value. Unfortunately, the case was simply a consent judgment endorsing an agreement reached between the taxpayer and the prosecuting Crown counsel. Without the opportunity to review any judicial analysis or to have the benefit of an explanation of the Crown’s rationale for the consent, the judge was unwilling to allow Brown’s appeal.

Doug Carroll, JD, LLM (Tax), CFP, TEP, is vice president, tax and estate planning, Invesco Canada.