The Canada Revenue Agency (CRA) has denied a taxpayer's attempt to claim motor vehicle and work-from-home expenses for the 2021 and 2022 tax years, a decision that was upheld by the Tax Court of Canada in late June 2026. The case highlights the strict conditions employees must meet to deduct unreimbursed work expenses.
Taxpayer's Situation and Claim
The taxpayer, a resident of Kimberley, British Columbia, was unable to find local employment. In February 2021, he accepted a position as a controller for a company based in Salmon Arm, B.C., approximately a five-hour drive from Kimberley. Due to his spouse's unwillingness to relocate, he rented a small apartment in Enderby, B.C., near Salmon Arm, to fulfill his employer's requirement to work in the office from Monday to Friday. In November 2021, he changed jobs to another controller position in Kelowna, B.C., a six-hour drive from Kimberley, and rented an apartment there for the same reason.
The taxpayer claimed work-from-home expenses, including a portion of rent, hydro, and internet costs for his apartments in Enderby and Kelowna. He also claimed automobile expenses for travel between Kimberley and these temporary residences. He argued that these expenses were incurred in the course of his employment, as he could not have worked for these employers without maintaining a secondary residence near the workplace. He testified that his Kimberley home remained his primary residence, which he visited one weekend per month while working in Salmon Arm and once or twice monthly while in Kelowna.
Legal Requirements for Deducting Employment Expenses
Under the Income Tax Act, employees may deduct unreimbursed employment expenses only if they meet specific conditions. Key among these is the requirement that the employee's contract of employment obligates them to pay for the expenses themselves. Additionally, the employee must obtain a signed Form T2200, Declaration of Conditions of Employment, from their employer, certifying that the conditions of employment require the employee to incur these expenses. The CRA denied the taxpayer's claims, and the Tax Court of Canada upheld the denial.
Justice Susan Wong, in her ruling, acknowledged the taxpayer's "difficult personal situation" but found that he failed to satisfy the legal criteria. She noted that the taxpayer did not provide a properly completed Form T2200 for either year. Moreover, the court determined that the expenses were not incurred "in the course of" his employment but rather were personal choices related to his living arrangements. The travel between Kimberley and his work locations was considered commuting, which is generally not deductible. Similarly, the rent and utility costs for his apartments were personal living expenses, not expenses required by his employment.
Court's Analysis and Decision
The court emphasized that the test for deductibility is objective: the expense must be required by the employment contract, not merely convenient or necessary for the employee's personal circumstances. The taxpayer's argument that he could not have worked for these employers without the secondary residences was rejected because the employers did not mandate that he live in those locations; they only required him to attend the office. The taxpayer chose to live in Kimberley for personal reasons, and the costs of that choice are not deductible.
According to the court, the taxpayer's travel between his primary residence and his temporary work residences was personal commuting, which is not deductible under the law. The court also noted that the taxpayer did not demonstrate that the expenses were directly related to earning income, as required by the Income Tax Act. The CRA's denial of the deductions was therefore correct.
Implications for Taxpayers
This case serves as a reminder that employment expense deductions are narrowly defined. Employees seeking to claim such deductions must ensure they have a signed Form T2200 from their employer and that the expenses are explicitly required by their employment contract. Personal choices, such as where to live, generally do not give rise to deductible expenses, even if they are necessary for the employee to accept a job. The CRA and courts will scrutinize claims to ensure they meet the strict legal conditions.
