There is a Q & A Update about the Tax Credit for Public Transit Passes
Beginning on July 1, 2006, the Government of Canada is offering individuals a non-refundable tax credit to cover the cost of public transit passes. If you have a public transit pass, make sure to read the questions and answers below.
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.
To find out more about the tax credit for public transit passes, please visit www.transitpass.ca.