2023-0962521E5 Employment Expenses of a Pilot

Principal Issues: Whether a pilot can deduct the cost of meals and their aviation headset from employment income.

Position: Yes to meals, no to aviation headset.

Reasons: Meals may be deductible under paragraph 8(1)(h) of the Act, but aviation headsets do not qualify as tools for purposes of paragraph 8(1)(s) of the Act.

Author: Leung, Brenna
Section: 8(1)(g); 8(1)(h); 8(1)(i)(iii); 8(1)(s)

XXXXXXXXXX                                                                    2023-096252
                                                                                            B. Leung

May 26, 2023

Dear XXXXXXXXXX:

Re: Employment expenses of a pilot

We are writing in response to your correspondence of January 18, 2023, wherein you asked about the deductibility of a pilot’s meal expenses, and whether a pilot can deduct the cost of an aviation headset they were required to purchase from their employment income.

In the situation you describe, the pilot is an employee who is engaged in the transport of goods and/or passengers to airports across Canada. For each of these trips, the pilot is away for 12 to 17 hours in a day and is not required to be away overnight. That is, the pilot returns to the employer’s place of business by the end of the day and does not incur expenses for lodging.

Our comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (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 IC70-6R12, Advance Income Tax Rulings and Technical Interpretations.

Subsection 8(2) of the Act provides that no deductions are allowed in computing an individual’s income from employment except as specifically authorized under section 8 of the Act. Generally, these deductions are restricted to certain expenses incurred while performing employment duties.

Meals

Generally, a transport employee can deduct travel expenses (including the cost of certain meals) under paragraph 8(1)(g) or 8(1)(h) of the Act, when certain conditions are met. As indicated in paragraph 3 of IC73-21R9, Claims for Meals and Lodging Expenses of Transport Employees, one of the conditions for claiming a deduction for meals under paragraph 8(1)(g) of the Act is that an employee must generally be away from home overnight in the performance of their employment duties. Accordingly, the deduction of meal expenses under paragraph 8(1)(g) of the Act is not available to a pilot who returns to their home at the end of each day.

However, in situations where the conditions of paragraph 8(1)(g) of the Act are not met, a transport employee may be entitled to deduct the cost of meal expenses under paragraph 8(1)(h) of the Act. More specifically, paragraph 8(1)(h) of the Act permits a deduction for travel expenses (e.g., food, beverage, and lodging expenses) where all of the following conditions have been met:

* The employee is ordinarily required to carry on the duties of employment away from the employer’s place of business or in different places,

* The employee was required under the contract of employment to pay the travel expenses incurred in the performance of the duties of employment,

* The employee is not in receipt of a non-taxable allowance for traveling expenses, and

* The employee has not claimed a deduction under any of paragraphs 8(1)(e), (f), or (g) of the Act.

The deduction of meals under paragraph 8(1)(h) of the Act is also subject to the requirements in subsection 8(4) of the Act, which provides that an employee can only deduct the cost of meals consumed during a period while they were required by their duties to be away for at least 12 consecutive hours from the municipality and the metropolitan area (if there is one), where the employer’s establishment to which they regularly reported for work was located.

Where the conditions of paragraph 8(1)(h) and subsection 8(4) of the Act are met, subsection 8(10) of the Act further requires that Form T2200 – Declaration of conditions of Employment be completed by the employer. With regard to the deduction of meals itself, section 67.1 of the Act limits the deductible amount for the cost of eligible meals to 50% of the lesser of the amount actually paid, or an amount that is reasonable in the circumstances. Further, as noted in paragraph 14 of IC73-21R9, a maximum of three meals may be claimed per day (i.e., one meal every four hours from the departure time).

Aviation headset

There is no general provision in section 8 of the Act under which the cost of an aviation headset can be deducted from employment income, even if it is required to perform employment duties.

Subparagraph 8(1)(i)(iii) of the Act allows a deduction for the cost of supplies consumed directly in the performance of the duties of employment when the employee is required to provide and pay for such supplies. The word “supplies” as used in subparagraph 8(1)(i)(iii) of the Act is limited to materials that are used up directly in the performance of the duties of employment and accordingly would not apply to any types of tools or equipment. Therefore, the cost of an aviation headset would not be deductible under subparagraph 8(1)(i)(iii) of the Act.

Paragraph 8(1)(s) of the Act currently provides a deduction for tradespersons for the first $500 spent in excess of $1,000 (indexed for inflation by section 117.1 of the Act) on “eligible tools” in a taxation year. Under proposed legislation, the maximum deduction is increased from $500 to $1,000, effective for 2023 and subsequent taxation years. The term “eligible tools” is defined in subsection 8(6.1) of the Act as a tool that:

a) is acquired by the taxpayer for use in connection with the taxpayer’s employment as a tradesperson,

b) has not been used for any purpose before it is acquired by the taxpayer,

c) is certified in prescribed form by the taxpayer’s employer to be required to be provided by the taxpayer as a condition of, and for the use in, the taxpayer’s employment as a tradesperson, and

d) is not an electronic communication device or electronic data processing equipment (unless it can be used only for the purpose of measuring, locating or calculating).

It is our understanding that aviation headsets are worn by pilots to prevent hearing loss and to facilitate communications with Air Traffic Control. Aviation headsets are generally equipped with noise reduction technology and may include Bluetooth as well.

In our view, aviation headsets would not be considered tools. Paragraph 2 of Interpretation Bulletin IT-422, Definition of Tools provides that in order for an asset to be a tool, it must be designed to create a physical change in something or be used as an instrument of measurement or manipulation. Examples include hammers, saws, squares, screwdrivers and hand-held power tools. In addition, paragraph 8(6.1)(d) of the Act specifically excludes electronic communication devices as eligible tools. Therefore, the cost of an aviation headset would not be deductible under paragraph 8(1)(s), or any other provision of the Act.

However, employed pilots can claim the Canada employment amount, which provides recognition for work-related expenses incurred by employees.

We trust 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

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