Tradespeople often incur expenses unlike those incurred by people working in other professions. Because of this, there are tax credits and deductions specific to people working and studying in the trades. This blog post will help you keep track of the various claims available.
It all starts with school.
People in trades programs are eligible for the same tuition credits as other students, as long as the program is through a designated educational institution and is a qualifying or specified educational program. We don’t need to get into the details of what that means right now. If you’re taking a typical full-semester program at a college or university that offers post-secondary degrees, you’re good. If you’re taking a program at a career college or through an online institution, you might want to investigate a bit further. Here’s a link to a government website where you can look up the name of the institution offering the program to make sure they’re a designated educational institution.
The end of February is usually when you’ll receive your T2202 Tuition and Enrolment Certificate. This is the tax slip you use to claim your tuition credits on your tax return.
Apprenticeship grants and the training tax credit
If you’re registered as an apprentice with SkilledTradesBC (formerly called the Industry Training Authority or ITA), you’ll have a record of hours worked. Depending on your trade, once you’ve finished either your first or second year (check for a Confirmation of Progress letter on your SkilledTradesBC account), you can apply for the Apprenticeship Incentive Grant (AIG). This is $1,000 from the federal government. Once you finish your program and get your Certificate of Apprenticeship and Certificate of Qualification, you can apply for the Apprenticeship Completion Grant (ACG), which is a $2,000 payment. The grants are administered completely separately from the tax return, but you will receive a T4A tax slip and have to report the income on your tax return.
There is also a training tax credit that you can claim on your tax return for completing different stages of your apprenticeship. It gets a little complicated, since the credit is claimed at different times depending on what trade you’re in and whether it’s a Red Seal trade or not. There’s a whole table available from the Province of BC that gives you the details for each trade, which you can find here.
The important part is that the training tax credit is a refundable credit, which means that even if your tax payable is zero, you can still get money back on your tax return.
Tool deductions and the Labour Mobility Deduction
Once you’re working, you’re eligible to claim a deduction for tools you have to purchase for work. Now this one isn’t as great as it sounds initially. Everyone who works is eligible to claim the Canada Employment Amount (which is set at at maximum of $1,368 for 2023) on their taxes. This credit is intended to help with expenses like getting to and from work, clothing, PPE, etc. So tradespeople are expected to use up that credit first, and then anything they spend over and above that amount can be claimed on tools...and only to a maximum of $500. What it comes down to is that you need to spend close to $1,900 on tools to claim the maximum $500 tool deduction. This one is a deduction, though, rather than a credit. That means that whatever you claim will reduce your taxable income, which is especially helpful if you’re in a higher tax bracket.
There’s good news for apprentice mechanics. Because your tools are so expensive and you have to buy so many of them, you’re able to claim more than the $500 deduction that other trades are limited to. The tool deduction for apprentice mechanics can be thousands of dollars You can also carry forward tool expenses that you’re not able to claim in one year and claim them the next year. The amount you can claim is determined by a formula taking into account employment income, tool claim as calculated for other trades, any receipt or repayment of AIGs or ACGs, and any tool deduction amount carried forward from a prior year.
No matter what trade you’re in, in order to claim your tools you’ll need your employer to issue a form called a T2200 Declaration of Conditions of Employment and sign off on the list of tools you were required to buy for work.
The last one on the list is a deduction that’s been requested for a long time but only been around since the 2022 tax year. It’s called the Labour Mobility Deduction (LMD), and it’s intended to help tradespeople working in the construction industry who need to relocate for temporary work. This one is intended for people who have a permanent home in one location, but pay for lodging somewhere else in order to be closer to work. This could be staying at a hotel, renting an apartment, or even staying at a campground. Wherever you're staying needs to be at least 150 km closer to work than your usual home, and you need to be there for at least 36 hours.
This one isn't intended to help people who are back and forth between home and their distant job. You can claim travel costs for one round trip between home and your temporary lodging, meals while you're traveling, and all your accommodation costs at the temporary location. Your total claim for the year is limited to 50% of your income from each job or $4,000 – whichever is lower. If you're in a situation where you start work at your temporary location late in the year, don't make a lot of money, but incur a lot of expenses to get to your new accommodation, Canada Revenue lets you carry forward your expenses to the next year and claim them once your income is higher.
For the LMD, you don't need to get a T2200 form from your employer, but you do need to keep receipts of all your expenses.
Northern Residents Deduction
Another deduction that isn't specific to tradespeople, but is worth keeping in mind is the Northern Residents Deduction. If you're working anywhere in Northern Canada, check if you're in a Prescribed Zone. In BC, you start getting into those zones north of Prince George. Think Chetwynd and Tumbler Ridge. Here's a list of towns in Prescribed Zones, if you want to look up a specific place. The Northern Residents Deduction is not for people flying in and out of camp, however. You need to live in the Prescribed Zone permanently for at least six months to be eligible.
As you can see, there are quite a few credits and deductions available to tradespeople. Hopefully some of them work for you!