There seems to be some confusion about the years to which the fitness tax credit and transit pass credit apply. This Tax Tip is intended to clarify the situation. The fitness tax credit will apply for the 2007 taxation year. The transit pass credit will apply from the 2006 taxation year.
Transit Pass Credit
The transit pass credit applies in respect of “an eligible public transit pass” that allows the individual to use “public commuter transit services” provided by a qualified Canadian transit organization for an uninterrupted period of at least 28 days. There are many provisions that limit the ability to claim this credit. Taxpayers who purchase daily or weekly passes are not eligible for the transit pass credit, since the transit pass credit is meant to apply to transit passes that are for at least one month in duration.
Public commuter transit services are defined as services offered to the general public by means of bus, ferry, subway, train or tram. In situations where the transport only carries seven or eight passengers or where an automobile is used to commute, the cost will not qualify for the credit.
The transit pass credit will reduce taxes payable before claiming the tuition or education credits. In certain circumstances, the tuition and education credit can be carried forward to be used in a future year. On the other hand, the transit pass credit cannot be carried forward.
Children’s Fitness Tax Credit
Guidance is still being published by the CRA concerning which activities will qualify and the type of receipts required. In general, the fees must be paid for a child who is under 16 at any time in the year. The fees must relate to the cost of registration or membership in an eligible program or a physical fitness activity.
Registration and membership cost can include the cost of administration, instruction and the rental of facilities. However, eligible fees do not include accommodation, travel, food, or beverages. The ineligible amounts must be deducted from the total fees. Only the net amount will qualify for the tax credit.
TAX TIP OF THE WEEK is provided as a free service to clients and friends of the Tax Specialist Group member firms. The Tax Specialist Group is a national affiliation of firms who specialize in providing tax consulting services to other professionals, businesses and high net worth individuals on Canadian and international tax matters and tax disputes.