Employee Deduction of Travel Expenses for Commuting

As a general rule, you may not deduct expenses from employment income except for certain employment – related expenses that are specifically allowed. One example of such an allowable deduction is the motor vehicle travel expense in a limited number of situations. An employee who is ordinarily required to perform their work away from the employer’s place of business or who is “on the road” for work at all times and is required to use a vehicle can use the travel expenses incurred as a deduction against employment income. The employer must complete Form T2200 “Declaration of Conditions of Employment” in order for the employee to be able to deduct employment expenses from his/her income. Our experienced Vancouver tax lawyers can provide tax help for deductible expenses.

In general, motor vehicle expenses can only be claimed as expenses related to “on the job” travel. If you drive from your home to your place of employment and then back home, you may not claim the travel costs associated with that commute. This is because Canada Revenue Agency (“CRA”) regards this use as a personal use of your motor vehicle. However, if you are required by your employer to take your motor vehicle to work and would have taken a less expensive means of transport to work had it not been for your employer’s requirement, you may be eligible to claim the costs associated with your commute to work as a deduction on your income tax return.

In the Tax Court of Canada decision of Tolson v. HMQ [2007TCC661], the taxpayer was required to travel for employment related purposes and his employer gave him two vehicle allowances – a per kilometre allowance and a fixed allowance. When claiming motor vehicle expenses, the taxpayer included the expenses associated with his daily 30-kilometre drive between his residence and his office. The taxpayer justified this by stating that the only reason he took his motor vehicle to work was because his employer required him to do so. If it had not been for his employer’s requirement, he would have carpooled or taken public transportation. The Minister denied the deduction on the basis that traveling to and from work was personal use of a motor vehicle. In addition, although the taxpayer was entitled to claim a per kilometre allowance, he did not do so. Therefore the Minister presumed that the taxpayer did not use the vehicle for employment-related purposes and denied all motor vehicle expenses.

Justice Sheridan found that the taxpayer was required to have his motor vehicle available at the office and that the only way that requirement could be satisfied was to drive it to work each day. Although counsel for the Crown suggested that the taxpayer should have left his vehicle permanently parked at the office, the judge stated that this would have deprived the taxpayer of all personal use of his vehicle and that such deprivation would be unreasonable. Therefore, the taxpayer was allowed to claim the deduction for the travel expenses associated with his commute to and from work. The taxpayer was also permitted to claim his “on the job” travel expenses despite the fact that he did not claim the per kilometre travel allowance. If you have received a CRA tax assessment to deny tax deductions contact our top Canadian tax lawyers to fight CRA for you.