TRANSPORTATION BENEFITS, T2200 & T777 GUIDE
1. Overview
Transportation allowances or reimbursements provided to employees for commuting between their home and regular place of employment are generally considered personal benefits and are taxable under the Canada Revenue Agency (CRA) rules. However, certain exceptions apply depending on the circumstances and nature of the transportation provided.
2. Taxable Transportation Allowances
In most cases, transportation benefits are taxable and must be reported as part of the employee’s income. These include:
- Direct Allowances: Any payments made to cover the cost of commuting are taxable unless they meet specific non-taxable criteria.
- Reimbursements: If the employer reimburses transportation expenses without valid exceptions, the amount is considered taxable income.
- Private Vehicle Usage: Payments for using a private vehicle for commuting to work are generally taxable.
3. Exceptions to Taxable Status
The CRA allows certain exceptions where transportation benefits are not taxable:
- Remote Work Locations: If an employee works at a remote location and transportation is necessary due to the lack of suitable living accommodations nearby, the benefit may not be taxable.
- Special Work Sites: Allowances for transportation to and from special work sites are non-taxable if the worksite is temporary and the employee maintains a residence elsewhere.
- Group Transportation: Transportation provided via employer-operated buses or shuttles for employee commuting may not be taxable if the employer recovers the costs and does not provide additional subsidies.
4. T2200 - Declaration of Conditions of Employment
The T2200 form is a CRA document that allows employees to claim employment-related expenses that are not reimbursed by their employer. This is particularly relevant for workers who need to travel between multiple job sites for work-related purposes.
Who Qualifies for a T2200?
- Employees who regularly travel to multiple job sites as a condition of employment.
- Workers who use their personal vehicle for job-related duties without reimbursement.
- Employees required to purchase tools, supplies, or safety equipment for their job.
Commuting vs. Work-Related Travel
The CRA differentiates between commuting (not deductible) and work-related travel (deductible):
- Personal Commuting: Driving from home to a single job location is not deductible, even if the location changes every few days.
- Work-Related Travel: Traveling between multiple job sites during the workday is deductible.
Examples:
- Example 1: A construction worker assigned to different sites weekly but always commuting from home to one site is not eligible for a T2200.
- Example 2: A site inspector who drives between multiple sites daily may qualify for a T2200 and claim work-related mileage expenses.
5. T777 - Statement of Employment Expenses
The T777 form is used by employees to claim work-related expenses that were not reimbursed by their employer. Employees must use this form if they are eligible to deduct costs related to their job duties.
Who Should Use T777?
- Employees required to travel between multiple job sites as part of their employment.
- Workers who use their personal vehicle for work and are not fully reimbursed.
- Employees who pay out of pocket for tools, uniforms, supplies, or home office expenses required by their employer.
How to File T777
To claim deductions using T777, employees should follow these steps:
- Obtain a signed T2200 form from the employer confirming the expense requirements.
- Keep detailed records (receipts, invoices, and mileage logs).
- Fill out T777 - Statement of Employment Expenses and include it in the tax return.
6. Reporting Requirements
Employers must ensure proper reporting of taxable and non-taxable transportation benefits:
- Taxable benefits must be reported on the employee’s T4 slip under "Other Benefits."
- Non-taxable benefits must be supported with documentation to demonstrate compliance with CRA exceptions.
- For T2200, employees must complete T777 - Statement of Employment Expenses and submit both forms when filing their tax return.
7. Work-Space-in-the-Home Expenses
Employees who work from home may be eligible to claim work-space-in-the-home expenses. To do so, they must determine the portion of their home used for employment, either by area or hours worked:
- Area-based method: Calculate the percentage of your home used for employment based on square footage. Information required:
- Area of home used for employment
- Total area of home
- Time-based method: Calculate the percentage based on hours worked at home versus total available hours in the period. Information required:
- Hours used for employment
- Total hours in the period
Eligible expenses for deduction (based on employment-use percentage) include:
- Electricity
- Heat
- Water
- Maintenance (e.g., cleaning supplies, light bulbs)
- Home internet access fees
- Home insurance (only for commission-based employees)
- Property taxes (only for commission-based employees)
- Rent
- Other employment-related home expenses
Deductible claim is calculated as follows:
- Start with the total of eligible expenses.
- Subtract the personal-use portion.
- Add any unused work-space expenses from a prior year (if applicable).
Important: The final deductible amount is limited to your net employment income (i.e., after subtracting RPP contributions and union dues).
8. Examples
- Example 1: An employee receives $100 per month as a transportation allowance for commuting. This amount is taxable and must be included in the employee's income.
- Example 2: An electrician required to buy specialized tools and protective gear without reimbursement may qualify for a T2200 deduction.
- Example 3: A construction worker driving between multiple temporary job sites during the day can claim mileage expenses if a T2200 is issued.
9. Key CRA Resources
For more details on transportation allowances, taxable benefits, and the T2200 & T777 forms, refer to these CRA resources:
10. Conclusion
Understanding transportation benefits, taxable allowances, and employment-related deductions under the T2200 and T777 forms is crucial for both employees and employers. Proper documentation and compliance with CRA rules can help maximize eligible tax deductions while ensuring accurate tax reporting.
