Tax Credit for Public Transit Passes

Currently a non-refundable public transit tax credit can be claimed based on the cost of monthly public transit passes. The March 19, 2007 federal budget proposes to expand the eligibility criteria for the transit tax credit beginning January 1, 2007.

If you use public transit, please read the questions and answers below. To find out more about the tax credit for public transit passes, please visit www.transitpass.ca.

Expanded public transit tax credit
Monthly public transit pass tax credit

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Expanded public transit tax credit

1. What other public transit costs are eligible for a tax credit?
2. I did not keep receipts or old passes between January 1st and today. Would I still be able to claim the credit for those “undocumented” costs?

1. What other public transit costs are eligible for a tax credit?
Starting January 1, 2007, the public transit tax credit has been expanded to include costs for:

• Weekly passes:
  • You have at least 4 consecutive weekly passes, and each weekly pass provides unlimited public transit use for an uninterrupted period of between 5 and 7 days.
• Cost-per-trip electronic payment card:
  • The card is used for at least 32 one-way trips during an uninterrupted period not more than 31 days, and
  • The card is issued by a public transit authority that records and provides a receipt for the cost and usage of the card.

2. I did not keep receipts or old passes between January 1st and today. Would I still be able to claim the credit for those “undocumented” costs?
Taxpayers are expected to provide appropriate supporting documentation for any tax credit claimed, if requested to do so by the Canada Revenue Agency.

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Monthly public transit pass tax credit

1. What is the tax credit for public transit passes?
2. How do I claim the tax credit for public transit passes?
3. What will I need to support my claim?
4. My employer has told me that my payroll deductions toward my transit pass will be included on my T4. Can you give me more information?
5. How much can I claim?
6. I use more than one method of public transit to commute. Can I claim more than one type of pass?
7. Can I claim the credit on behalf of my family?
8. In my area, passes for July are on sale starting mid-June. If I buy my July pass in June, does it mean that I cannot claim it?
9. How do I claim the tax credit for an annual pass for 2007 that I purchased in 2006?
10. How do I claim the tax credit for an annual pass for 2006 purchased in 2005?
11. How do I make a claim for an annual student pass purchased for the 2006-2007 school year?
12. How do I make a claim for an annual student pass purchased for the 2005-2006 school year?

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1. What is the tax credit for public transit passes?
The tax credit for public transit passes is a non-refundable tax credit for the cost of buying a monthly (or longer duration) pass for commuting on buses, streetcars, subways, commuter trains and local ferries.

2. How do I claim the tax credit for public transit passes?
You will be able to claim the tax credit for public transit passes on your 2006 income tax return for the amounts you have paid for travel that occurs after June 30, 2006.

3. What will I need to support my claim?
At a minimum, you will need to keep your expired monthly transit passes for months after June 2006 to support your claim.

If your transit pass displays all of the following information, the pass itself will be sufficient to support a claim for the tax credit:

• an indication that it is a monthly (or longer duration) pass;
• the date or period for which the pass is valid;
• the name of the transit authority or organization issuing the pass;
• the amount paid for the pass; and,
• the identity of the rider, either by name or unique identifier.

If the pass does not have all of this information, you will also need to keep receipts, cancelled cheques or credit card statements, along with your pass(es), to support your claim. The credit will be available for the portion of the pass that is used on or after July 1st, even if the pass is purchased before that date.

The CRA will accept receipts (letters) generated by employers or Employer Pass Program Coordinators for employer transit pass programs. The receipt should note the purpose, exact amount received, date of payment, and name of the payee.

Generally, the CRA does not consider a bank statement a valid receipt. However, if the statement clearly indicates the purpose of the debit (for example, Employee FareCard), we will accept this as support for the claim.

You will not need to submit any documentation when you file your return, but you must keep it in case the Canada Revenue Agency (CRA) asks for it in verifying your claim.

4. My employer has told me that my payroll deductions toward my transit pass will be included on my T4. Can you give me more information?
The 2006 T4 slip will contain a new code (box 84 - public transit pass) in the "Other information" area. The employer will enter a dollar amount in box (84), and the employee will claim this amount on line 364 of the T1 return. Box 84 has to be completed whether the employee purchases the pass through payroll deductions or the employer pays for it or provides it free. When an employer pays for or provides a pass, the taxable benefit has to be included in the employee's income to allow a claim for the credit at line 364.

For the 2006 tax year, the use of box 84 is optional. The employer may enter an amount on the T4 slip to allow the individual to claim the amount on his or her return.

• If the employee paid the amount (for example, through payroll deductions), he or she can claim it on line 364.
• If the employer paid the amount, it is a taxable benefit and the employee can claim it on line 364.

5. How much can I claim?
You can claim the full amount paid for a public transit pass, or for the cost of passes for multiple transit systems (see question 6 below).

The tax credit is a non-refundable tax credit, which means that the amount you claim is multiplied by the lowest personal income tax rate for the year (15.25 per cent in 2006) and is then deducted from your tax otherwise payable.

6. I use more than one method of public transit to commute. Can I claim more than one type of pass?
Yes, you can claim the full amount of any combination of transit passes.

7. Can I claim the credit on behalf of my family?
Yes, you can claim the tax credit for public transit passes on behalf of your spouse, common law partner, and your children under the age of 19, to the extent that these amounts have not already been claimed.

8. In my area, passes for July are on sale starting mid-June. If I buy my July pass in June, does it mean that I cannot claim it?
No, as long as you keep your receipt and your pass, you can claim amounts you have paid for travel that occurs after June 30, 2006, as would be the case of your July pass, no matter when you purchased it.

9. How do I claim the tax credit for an annual pass for 2007 that I purchased in 2006?
If you paid for your 2007 annual pass in 2006, you will only be able to claim the tax credit on your 2007 tax return, because no portion of the cost of the 2007 annual pass was used for travel in 2006.

10. How do I claim the tax credit for an annual pass for 2006 purchased in 2005?
You will be able to claim the amount paid for your 2006 annual pass purchased in 2005 for travel that occurs after June 30, 2006, on your 2006 tax return.

11. How do I make a claim for an annual student pass purchased for the 2006-2007 school year?
If you paid in 2006 for a student annual pass for months in 2006 and 2007, you can claim the amount paid for the portion of travel that occurs in each taxation year. For the portion used in 2006, you can claim the cost for travel that occurs after June 30, 2006 to December 31, 2006 on your 2006 tax return. You can claim the portion of the cost of travel that occurs in 2007 on your 2007 tax return.

12. How do I make a claim for an annual student pass purchased for the 2005-2006 school year?
If you paid in 2005 for a student annual pass for months in 2005 and 2006, you can claim the amount paid for the portion of travel that occurs after June 30, 2006, on your 2006 tax return.