Eligible tools which were purchased in order to earn
employment income as a tradesperson (hairdresser, cook, plumber, electrician,
mechanic, apprentice tradesperson, etc.) may be deducted as employment expenses on
line 229 of the federal tax return. Employment expenses are
first entered on Canada Revenue Agency (CRA) Form
T777 Statement of Employment Expenses.
For 2012, the "base
amount" used in the calculation of the tool deduction is $1,095 ($1,117
for 2012). No deduction is available unless the cost of tools exceeds
this amount. The maximum deduction is $500. The base amount is
indexed for inflation each year, in the same manner as tax brackets and
non-refundable personal tax credits.
The Québec calculation for the tool deduction for salaried
tradespersons differs from the one described below. However, Québec has
a fillable form, TP-75.2-V,
which you can complete, and it will calculate the appropriate deduction
amount. The maximum deduction for Québec residents is also $500, and no
deduction is available unless the total cost of tools exceeds $1,055 for 2011
($1,085 for 2012).
What is an eligible tool?
An eligible tool of a taxpayer is a tool, including related equipment, such
as a toolbox, that:
is acquired by the taxpayer on or after May 2, 2006 for the use of the
taxpayer in employment as a tradesperson;
has not been used for any purpose before it is acquired by the taxpayer;
is certified, using form T2200
Declaration of Conditions of Employment, by the taxpayer's employer to
be required to be provided by the taxpayer as a condition of, and for use
in, the taxpayer's employment as a tradesperson; and
is, unless it can be used only for the purpose of measuring, locating or
calculating, not an electronic communication device or electronic data
less the amount of any Apprenticeship Incentive
Grant and Apprenticeship Completion Grant overpayments repaid in the
Tool purchases in 2012 = $3,000
Employment income as a tradesperson = $35,000
Apprenticeship Completion Grant received = $1,500
Apprenticeship Incentive Grant overpayment repaid =
X = A - $1,095
A = the lesser of
total cost of eligible tools of $3,000, and
$35,000 + $1,500 - $550 = $35,950
Therefore, X = $3,000 - $1,095 = $1,905, and
the allowable deduction is the lesser of $500 and $1,905,
which is $500.
The tool costs will include any GST/HST or
provincial sales taxes incurred. You may be eligible for a refund of the
GST/HST included in the costs. See Employee
and Partner GST/HST rebate on the GST/HST page.
When the tools deduction is claimed, keep the information that will allow you
to calculate the adjusted cost of each tool. The adjusted cost is the
original cost reduced by any tool deductions claimed. If you subsequently
sell a tool, it is necessary to include any gain from the sale in income.