Principal Issues: Whether an eligible taxpayer in receipt of a travel benefit from employment may continue to claim two trips per person, on a taxpayer by taxpayer basis, under the amended legislation.
Position: No.
Reasons: See below.
XXXXXXXXXX B. Zabolotney 2022-096506
October 3, 2023
Dear XXXXXXXXXX:
Re: Northern residents travel deduction
We are writing in response to your letter of February 18, 2023, concerning the northern residents travel deduction. In your correspondence, you ask whether an eligible taxpayer who receives a taxable travel benefit from employment may continue to claim two trips per person, on a taxpayer by taxpayer basis, in light of recent amendments to section 110.7 of the Income Tax Act (Act).
Our comments
This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.
Section 110.7 of the Act provides that in computing an individual’s taxable income for the year, a deduction in respect of certain trip costs (“travel deduction”) and living costs may be claimed where the individual resides in a “prescribed northern zone” or a “prescribed intermediate zone” (defined in section 7303.1 of the Income Tax Regulations), throughout a period of at least 6 consecutive months commencing or ending in the year.
Your question concerns the travel deduction component of the northern residents deductions. In this regard, you have referred to technical interpretation (TI) 2009-0318891E5, wherein we indicated that an eligible taxpayer who receives a taxable travel benefit from employment may claim two non-medical trips per person, on a taxpayer by taxpayer basis. You have asked whether this TI continues to reflect the position of the Canada Revenue Agency.
The travel deduction component of the northern residents deductions was recently expanded to be available to all eligible northern residents who take a trip, even if they did not receive taxable travel benefits from employment. Effective for 2021 and subsequent tax years, and subject to certain restrictions, eligible northern residents now have the option to claim a standard amount in respect of non-medical trips taken themselves or by eligible family members. As a consequence of this change, a number of amendments were made to the legislative provisions related to the northern residents deductions. In this regard, subsection 110.7(3) of the Act now provides that:
“The total of all amounts determined under paragraph (1)(a) for all taxpayers in a taxation year in respect of an individual shall not be in respect of more than two trips made by the individual that begin in the year (other than trips to obtain medical services that are not available in the locality in which the taxpayer resided).
In other words, a total of two non-medical trips per year per individual traveler (i.e., the taxpayer and an eligible family member) may be claimed by “all taxpayers” in a particular taxation year, regardless of whether a travel benefit received from employment or the standard amount is used. Trips to obtain medical services not available in the locality in which the taxpayer resides are not subject to this limitation.
In the example provided in T1 2009-0318891E5, Mr. X claimed his portion of travel costs for trips A and B (two trips) and Mrs. X’s travel costs for trips A and B (two trips). Accordingly, the travel costs for trips C and D cannot be claimed by either Mr. or Mrs. X under the amended rules, as the two non-medical trip limit for both has been reached for the year.
We trust that these comments will be of assistance.
Yours truly,
Tom Baltkois, CPA, CGA
Acting Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch