Preparing Your 2024 Canadian Taxes

By Dan White, Managing Benefits Attorney, ALPA Representation Department, Retirement & Insurance Team, with Assistance from Outside Canadian Tax Counsel

ALPA’s Retirement & Insurance Team has put together the following information regarding travel expenses to assist Canadian members in preparing their taxes.

Many collective agreements require airlines to cover the cost of meals, accommodations, and other incidental expenses (M&IE) while pilots are flying the line. The tax treatment of these benefits varies depending on the nature of the cost, how the benefit is provided, and whether receipts or other records are required to confirm the costs incurred.

General tax treatment

Generally, any benefit that an employee receives from their employer is included in their taxable income. However, there are key exemptions that apply to M&IE. For example, amounts provided when an employee travels away from the municipality where they ordinarily report to work or where an employee is temporarily required to report to work at a new location may be exempted, and there’s a general exemption for amounts provided in cases in which the “primary beneficiary” of the benefit is really the employer, not the employee.

The tax treatment and record-keeping requirements for M&IE depend on whether amounts are provided as a set dollar amount—usually called an “allowance”—or as a reimbursement for a cost that the pilot has already incurred.

Reimbursements

Reimbursements for meals provided while on business travel and for accommodation costs incurred while on layover away from an assigned base will generally be nontaxable, as is the case for reimbursements for other costs that the pilot wouldn’t have incurred except for employment duties, such as uniform purchases, dry cleaning, vaccinations, visas, and departure fees. In contrast, allowances for travel from the pilot’s residence to their home base are generally taxable.

For reimbursements, the Canada Revenue Agency (CRA) requires that employees maintain records (generally receipts) to support the expenses and provide those records to the employer. Airlines will generally require pilots to follow this rule. If not, it’s recommended to nevertheless maintain records so that, in the event of a CRA audit, the pilot is able to substantiate that the reimbursements were work-related.

Allowances

According to the CRA, an allowance is a “periodic or lump sum” amount paid on top of salary to cover an employee’s anticipated expenses, without requiring the employee to support the expense. An allowance is usually a predetermined amount for a specific purpose; and for an allowance to be excluded from taxable income, the law requires that the amount is reasonable under the circumstances. Generally speaking, an allowance will be considered reasonable if it’s designed to cover out-of-pocket costs that an employee will incur for the particular purpose, which is generally true of meal and accommodation allowances negotiated under ALPA’s collective agreements.

Tax filings

In cases in which the airline has treated reimbursements and allowances as nontaxable, the amounts should not appear on the employee’s T4 or T4A slip. Travel expenses that the airline has treated as taxable will appear in Box 32 of the T4 or Box 28 of the T4A.

Deducting unreimbursed expenses

If a pilot incurs job-related meal and accommodation expenses that aren’t reimbursed, they may be able to deduct those amounts from their taxable income. To do so, the pilot must complete and have the airline certify a TL2–Claim for Meals and Lodging Expenses (“Form TL2”) and claim the expenses on Line 22900 of their income tax return. A pilot isn’t required to send Form TL2 with their return but should keep a copy of the form in case the CRA requests it in the future.

For meals, two methods are available for calculating a deduction. For the simplified method, the pilot is required to maintain a log of the trips taken and may claim a maximum of three meals per day using a rate of $23 per meal. For this method, no receipts are required. Alternatively, for the detailed method, a pilot must itemize each meal expense in a log and must retain receipts to support the amounts deducted. For both methods, the maximum amount that can be deducted is 50 percent of the amount claimed. (For example, for the simplified method, the maximum amount that can be deducted per meal is $11.50 ($23 x 50%).

Accommodation expenses may generally be deducted in full, but receipts must be maintained.

If the airline covers a portion of the meal or accommodation costs, the pilot must subtract the amount the airline provides from their claim.

This article was originally published in the January 2025 issue of Air Line Pilot.