Line 22900 is updated from Forms T777, TL2 (Claim for board and lodging expenses) and T4PS - Statement of Employee Profit-Sharing Plan.
You can also enter other allowable expenses not reported on one of these forms. For instance, legal fees incurred to recover wages.
Apprentice vehicle mechanic's tools deduction
This help topic consists of excerpts from paragraphs 3149, 3390 and 8047 contained in the Canadian Tax Reporter Commentary book of the CCH Tax Research Library.
The deduction under paragraph 8(1)(r) applies to eligible tools acquired after 2001.
The deduction under paragraph 8(1)(r) for a taxation year applies to a taxpayer that was an "eligible apprentice mechanic" at any time in the year, in respect of the cost of an "eligible tool" acquired in the year. If the taxpayer first became employed as an eligible apprentice mechanic in the taxation year, the deduction will also apply to the cost of an eligible tool acquired in the last three months of the preceding taxation year.
By virtue of subparagraph 8(1)(r)(i), the amount of the deduction in the year is limited to the taxpayer's income from all sources for the year, meaning that the deduction cannot lead to a loss.
In general terms, under subparagraph 8(1)(r)(ii) a taxpayer who is an eligible apprentice mechanic in a taxation year is entitled to deduct in the year the amount by which the cost of eligible tools acquired in the year exceeds the greater of $1,000 and 5% of the employee's income for the year from the apprenticeship employment.
Any part of the otherwise deductible cost of eligible tools that is not deducted in a year may be carried forward and deducted in computing the individual's income from employment in future taxation years. Thus, for example, if the taxpayer is precluded from taking a full deduction in the year in which the tool is acquired owing to the income limitation in subparagraph 8(1)(r)(i), the undeducted amount may be carried forward and deducted in the following year (subject again to the income limit in subparagraph 8(1)(r)(i)). Paragraph 8(6)(c) ensures that such carryforward can be utilized in the following year even if the taxpayer is no longer employed as an apprentice mechanic. The carryforward can apply indefinitely.
Subsection 8(6) defines the terms "eligible apprentice mechanic" and "eligible tool" for these purposes. An "eligible apprentice mechanic" is defined as a taxpayer that at any time in the relevant taxation year is employed as an apprentice mechanic and is registered in a program established under provincial law that leads to a designation as a mechanic licensed to repair self-propelled motorized vehicles. An eligible tool is defined to mean a tool (including ancillary equipment) that is acquired by the taxpayer for use in connection with the employment as an apprentice mechanic, that was not used for any purpose before such acquisition, and that is certified by the taxpayer's employer to be required to be provided by the taxpayer as a condition of, and for the use in, the employment as an apprentice mechanic.
Subsection 8(7) generally provides that when a taxpayer is entitled to deduct in a taxation year an amount on account of the cost of an eligible tool under paragraph 8(1)(r), the cost of the tool is reduced accordingly. The cost reduction will occur even if the taxpayer did not claim the deduction in the year.
Under paragraph 56(1)(k), when an eligible tool is disposed of for proceeds in excess of this reduced cost by the taxpayer or a person not dealing at arm's length with the taxpayer, the excess will be fully included in the income of the person making the disposition. If, however, the taxpayer transfers an eligible tool into a partnership or corporation on a rollover basis under subsection 97(2) (partnership) or 85(1) (corporation), the transfer will not lead to immediate income tax consequences. In such case, the transferee's capital cost of the tool will be deemed to be the taxpayer's original cost of the tool, and the amount by which the cost of the tool was previously reduced under subsection 8(7) will be deemed to have been previously deducted by the transferee as capital cost allowance. Thus, if and when the transferee partnership or corporation sells the tool, the sale may result in recapture, and a capital gain if the sale proceeds exceed the original cost of the tool to the taxpayer (the capital cost to the transferee).
By virtue of subsection 8(7), the taxpayer's cost of an eligible tool is reduced by the amount deductible in the year of acquisition under paragraph 8(1)(r), regardless of whether that amount was actually deducted in the year. Paragraph 56(1)(k) provides that when the eligible tool is disposed of for proceeds in excess of this reduced cost by either the taxpayer or a person not dealing at arm's length with the taxpayer, the excess is fully included in the income of the person making the disposition. However, the income inclusion occurs only to the extent that the proceeds actually received in the year and in preceding years exceeds the (previously reduced) cost of the tool and all amounts included in respect of the disposition in preceding years. Thus, an income inclusion will occur only once the vendor has actually received proceeds in excess of the cost of the tool.
Under amended subsection 6(8), the treatment accorded a GST rebate received in respect of eligible tools is the same as that accorded an expense. That is, the GST rebate is to be included in the taxpayer’s income for the taxation year in which it is received.
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