Tax Matters: So You Want to Be an Apprentice?
In my first year of university I had an economics professor who said if we – about 400 students – wanted to get rich, we should all drop out of school right now and begin training as plumbers or bricklayers. We laughed, but he wasn’t kidding.
In Ontario there are currently more than 140 trades in which you may apprentice. Employment Ontario divides these trades into four categories: construction, industrial/ manufacturing, motive power and service. There is a tax credit (other provinces may have similar credits) available to employers who take on apprentices. The allowable credit was expanded on March 27, 2009 to $10,000 a year to a maximum of $40,000 over four years. In order to be eligible for this deduction the apprenticeship must be approved by the Ministry of Training, Colleges and Universities(Ontario) and “...the corporation and the apprentice must be participating in an apprenticeship program in which the training agreement has been registered under the Ontario College of Trades and Apprenticeship Act, 2009 or the Apprenticeship and Certification Act, 1998, or in which the contract of apprenticeship has been registered under the Trades Qualification and Apprenticeship Act.”
This is important information if you are interested in an approved apprenticeship. It means that an employer can be compensated (actually have their expenses reduced) by taking you on as an apprentice. I believe most larger companies are aware of this program and have policies and procedures to take advantage of it. But a smaller company may not. In other words you want to give a prospective employer every possible reason to hire you, and reducing the cost of your services (at no expense to yourself) can be a large incentive.
Different fields have different benefits. In addition to the deduction for trades-persons tools (maximum $500), there is an additional deduction for eligible apprentice mechanics.
Simply stated, apprentice mechanics may deduct an amount equal to the total amount of tools purchased (as of 2009), minus the lesser of the total cost of tools purchased in that year and the greater of $500 plus the Canada employment amount claimed on line 363 of Schedule 1 (max. $1,044); and “5 percent of your employment income as an eligible apprentice mechanic; plus the amount you received in 2009 under the Apprenticeship Incentive Grant program and, under proposed changes, the Apprenticeship Completion Grant; minus any claim you made for the tradesperson’s deduction for tools, and the amount of any Apprenticeship Incentive Grant overpayments that you had to repay in 2009 and, under proposed changes, Apprenticeship Completion Grant overpayments that you had to repay in 2009” plus any carry forward of this credit available from 2008. Okay, so there is no simple way to state it.
The important thing to know about this credit is that there is no maximum dollar amount. The only limit is that the credit cannot exceed your income from all sources for the current tax year. This means that the credit can be applied against all sources of income not just the money you earn from your apprenticeship job.
The Income Tax Act and other related legislation are large and complex laws that frustrate even the professionals at times. This article is intended to increase your awareness of issues that affect you and encourage you to look more closely at the ones that relate directly to your situation. You are encouraged to seek professional guidance specific to your unique situation.
Michael L. Crawford, BA(Hons), CMA