If you drive to work, you may want to give yourself some extra time this
Tuesday morning as you compete with the added traffic of thousands of commuters
heading back to work and school after the summer holidays.
Generally speaking, the Canada Revenue Agency views the cost of driving to
and from work as a personal expense and not tax deductible. This principle can
be traced back to Britain and a 1926 case in which a London barrister, who had
to travel regularly to Portsmouth for business, tried to write off his
travelling costs, including "the small payment for the carriage to the Court of
the tin box containing his robes and wig."
The House of Lords denied his deduction as the expenses were not incurred "in
the course of" performing his duties but "partly before he enters upon them, and
partly after he has fulfilled them."
However, a 2006 Canadian tax case this past spring could broaden the scope of
what might otherwise be considered non-deductible commuting expenses from home
to an employer's place of business.
The case involved Dr. Alexandre Toutov, a computer programmer who attempted
to deduct certain travel expenses incurred between his home in Kingston, Ont.,
where he had a home office and in which most of his work was done, and Oracle
Telecomputing Inc., whose head office was in Carleton Place, Ont., a small town
just outside of Ottawa.
Oracle allowed him to work out of his Kingston home rather than relocate but
required him to visit customers in Carleton Place and other locations. Due to
the "flexibility" Oracle gave him in allowing him to work at home, the company
expected him to cover all travel and living costs when he had to travel to
Carleton Place.
The Canadian Revenue Agency denied his travel costs, claiming they were
personal since they involved commuting from his home to the company's head
office.
The judge disagreed, and concluded "that his office in Kingston is an
extension of Oracle's place of business and Mr. Toutov's principal place of
employment ... From that place he travels to other places ... where he meets
clients." The judge allowed all of Toutov's travelling expenses.
Perhaps you'd rather not drive to work this week? Then heed the advice of
federal Finance Minister Jim Flaherty, who during a July visit to the Richmond
Hill Transit Terminal, just north of Toronto, encouraged Canadians to leave
their cars at home and use public transit.
"Gridlock has become one of the most pressing issues across the [Greater
Toronto Area], eroding the quality of life and having a negative impact on
business and productivity," said Mr. Flaherty. "Our government's new transit tax
credit will make transit more affordable, giving people even more incentive to
park their keys and leave their cars at home."
The new credit, which came into effect on July 1, provides transit users with
a credit of 15.25% of the cost of a monthly transit pass.
A public transit user who spends $100 a month on a transit pass could save
about $90 in taxes this year and $180 annually starting in 2007.
You can also claim the costs of transit passes you buy for your spouse or
kids. Just remember to keep those receipts!
- Jamie Golombek, CA, CPA, CFP, CLU, TEP, is vice-president, taxation and
estate planning, at AIM Trimark Investments in Toronto
Jamie.Golombek @aimtrimark.com