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Are professional development courses tax deductible? |
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Many professional organizations require their members to continually
upgrade or update their skills through continuing education or
professional development courses. For those working with big
corporations or government, these courses are usually provided by the
employers free of charge. However, for private individuals
who work for small businesses, or self-employed entrepreneurs, they
usually have to shoulder the costs themselves. Therefore, the question
is: 1. Capital expenditure - Where a training or educational course results in a lasting benefit to the taxpayer, the costs incurred in connection with the course are considered to be capital in nature. The deduction of these capital expenditures as current expenses is disallowed by paragraph 18(1)(b); This is because a lasting benefit to the taxpayer is considered to occur where a new skill or qualification for a business is acquired. Examples are:
(a) A medical general practitioner is training to qualify as a
specialist.
(b) A lawyer is taking an engineering course that is unrelated to his or her legal practice. (c) A taxpayer is taking a university or other course leading to a degree or other certificate. (Note, however, that costs incurred in connection with a course of the type described in 4 below will not be disallowed merely because the course is conducted at, or under the sponsorship of, a university.) (d) A professor employed by a university takes a course during a sabbatical (see also comments regarding duration of training in 5 below) in order to acquire a new skill needed for a sideline business. 2. Current Expenditure - if a taxpayer takes a training course merely to maintain, update or upgrade an already existing skill or qualification with respect to his or her business or profession, expenses incurred in connection with such a course are not considered to be capital in nature and their deduction as current expenses is not disallowed by paragraph 18(1)(b). Thus, for example, costs incurred in connection with a course taken to enable a professional to learn the latest methods of carrying on his or her profession may be allowable, even if the course relates to an area of the profession in which the professional was not previously involved actively though qualified to be so involved. Examples are:
(a) A professional development course is taken as required or
recommended by a professional body to maintain professional
standards.
(b) A tax course is taken by a lawyer or accountant who is qualified to do tax work, whether or not he or she has previously been actively involved in such work. (c) A course on modern building materials is taken by an architect. (d) A course on electronic ignitions is taken by the owner of an automobile repair shop. In summary: if the training is capital in nature, it is not tax deductible, although if there is a tuition fee receipt from an educational institution, it is deductible as a tuition fee tax credit. If the training is current in nature, it is tax deductible as a training expense. Where do you report these expenses? 1. If you are a individual salaried taxpayer, you can report professional development or job-related training costs on line 229 other employment expenses of your T1 form. See form. 2. If you are self-employed running your own business, you can report this on your T2125 Statement of Business and Professional Activities in Part 5 Net Income (Loss) before adjustments. You can list training expenses under the main category Expenses.
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