14 May 2010 External T.I. 2010-0356101E5 - Deductions for students' tools and supplies

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether students may deduct the cost of tools and supplies.

Position: No deduction is available for items required by students. Supplies may qualify for the non-refundable tuition tax credit if the conditions are met.

Reasons: The cost of supplies may qualify as "ancillary fees" for a tuition tax credit but fees for property acquired are specifically excluded.

2010-035610

XXXXXXXXXX 								Rita Ferguson
									519-645-5261
May 14, 2010

Dear XXXXXXXXXX :

Re: Tools and supplies purchased by students

This is in response to your email of February 1, 2010 inquiring about deductions for tools and supplies purchased by students.

You have asked us to consider two examples. The first involves a student enrolled in cooking school, who was required to purchase knives, jackets, hats, utensils and an unspecified kitchen appliance to be used in the classroom. This student also uses his utensils at his place of employment. The second example involves a student who has completed training as a paramedic and is required to purchase a uniform, first aid kit, paramedic supplies and a paramedic bag for purposes of completing his on the job training.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

There is no provision in the Income Tax Act (the "Act") for any deduction of amounts paid by students for property acquired for use in, or as a requirement for, an educational course. Certain amounts paid may be considered ancillary tuition fees and qualify for the non-refundable tuition tax credit if they are paid to the educational institution and if all of the other requirements for the credit are met. Subsection 118.5(3) of the Act provides rules for the types of ancillary charges that may qualify for this purpose. These rules will allow payments for supplies which are used up during the education program to be treated as ancillary tuition fees. Although these expenses do not appear to be related to tuition in the case you have presented, we can advise that, for example, the fees for food supplies paid to a qualifying educational institution by students enrolled in a chef program can qualify as ancillary tuition fees. Similarly, if a paramedic student were to pay amounts to a qualifying educational institution for paramedic supplies used in the educational program, these amounts would qualify as ancillary tuition fees for purposes of the tuition tax credit.

However, it should be noted that subparagraph 118.5(3)(c)(ii) of the Act specifically excludes from eligible ancillary fees or charges any amount paid in respect of property to be acquired by students. This exclusion would apply to most of the items mentioned in your inquiry (special clothing, knives, utensils, appliances, a first aid kit or a paramedic bag). Guide P105, "Students and Income Tax" and Interpretation Bulletin 516R2, "Tuition Tax Credit" both provide further details concerning eligibility for the tuition tax credit.

Your letter suggests that one or both of the students in your examples may also be earning employment income. Accordingly, we would like to provide the following additional information concerning deductions that may be available where supplies or tools are purchased by an employee as a requirement under the contract of employment. Additional information on these deductions is available in CRA Guide T4044, "Employment Expenses."

Subparagraph 8(1)(i)(iii) of the Act provides a deduction for amounts paid by a taxpayer in the year as the cost of supplies that were consumed directly in the performance of the duties of employment and that the employee was required by the contract of employment to supply and pay for. The word "supplies" as used in subparagraph 8(1)(i)(iii) of the Act is limited to materials that are used up directly in the performance of the duties of the employment and accordingly would not apply to any types of tools which generally fall into the category of equipment. Note that in order to qualify for this deduction, subsection 8(10) of the Act specifies that the employee must file with his or her tax return, a prescribed form (the T2200), signed by the employer, certifying that the conditions for deduction under paragraph 8(1)(i)(iii) were met.

Of potential relevance to individuals in a culinary trade is paragraph 8(1)(s) of the Act, which provides a deduction for "tradespersons" for the first $500 spent in excess of $1,000 on "eligible tools" in the year. An eligible tool is defined in subsection 8(6.1) of the Act to be a tool (including ancillary equipment) that:

a) is acquired by the taxpayer on or after May 2, 2006 for use in connection with the taxpayer's employment as a tradesperson;

b) has not been used for any purpose before it is acquired by the taxpayer;

c) is certified in prescribed form 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

d) is, unless the device or equipment can be used only for the purpose of measuring, locating or calculating, not an electronic communication device or electronic data processing equipment.

Based on the limited information provided with your request we are unable to confirm whether either of these deductions will be available in the examples you have described. We have made reference to them for your information but it will remain a question of fact whether all of the conditions for either of these provisions have been met in any particular case.

We would also note that subsection 118(10) of the Act provides a non-refundable tax credit called the Canada Employment Credit. First effective in 2006, this credit recognizes that employees often incur various work related expenses. There is no requirement that a specific employment expense be proven. Rather, the credit is simply calculated as the lesser of an indexed amount ($1,044 for 2009) or the total of all income from office or employment for the year (not including any deductions under section 8 of the Act) multiplied by the appropriate percentage for the year. For 2009, this percentage is 15%.

We trust that these comments have been of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch