Weekly Tax Tips
Employed tradespersons can deduct part of the cost of eligible tools purchased throughout the year
Date: 15 Apr 2011
Individuals who are employed tradespersons may be eligible to claim an annual deduction of up to $500 to help cover the costs of new tools necessary for their trade. The deduction applies to the total cost of eligible tools if the following conditions are met:
- The total cost exceeds $1,051 for 2010 ($1,065 for 2011, indexed annually) and
- The purchase was made by an employed tradesperson.
The cost of the tools includes any GST and PST or HST that you paid for the tools.
An eligible tool is a tool that was bought solely for use in the tradesperson’s job and that was not used for any purpose before it was bought.
As well, an apprentice mechanic is allowed to deduct the cost of eligible tools purchased. The deduction allowed is equal to the cost of tools purchased less the greater of (a) 5% of employment income as an eligible apprentice mechanic or (b) $500 plus the Canada employment amount claimed. The allowable amount deducted can’t exceed an individual’s net income (from all sources). An unclaimed amount can be carried forward.
An apprentice mechanic may be able to claim the tradesperson’s tool deduction and the apprentice mechanic tools deduction. The tradesperson’s tool deduction however, must be calculated first, as it is taken into consideration in the calculation of the apprentice mechanic’s tools deduction. (A deduction can’t be claimed under both rules for the same tool cost).
If you dispose of tools on which the mechanic’s or tradesperson’s deduction was claimed, a special adjustment must be made in the year of disposition to determine if some portion of the proceeds from such disposition may be taxable as a result of the tradesperson’s or mechanic’s deduction claimed in an earlier year.
For more information, see the CRA website.
This tax tip is a publication of BDO Canada LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. The information in this tax tip is current as of 15 Apr 2011.
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