How much of my training costs can I claim as a business deduction?

Training costs will not be deductible if they are considered to be “capital” in nature—that is, if they result in a lasting benefit to the taxpayer.

This could include the acquisition of a new skill or qualification. However, if training is taken to maintain, update or upgrade an existing skill, the costs are 100% deductible—that is, unless they are also being claimed as a non-refundable tax credit under the tuition fee amount

Examples of expenses that are 100% deductible:

• A professional development course taken to maintain professional standards
• A tax course taken by a lawyer or accountant, whether or not he/ she has previously done such work
• A course on modern building materials taken by an architect

Therefore, training costs to attend a course that results in a degree, diploma, professional qualification or similar certificate are considered to be “capital” in nature. The costs would be scheduled in the Cumulative Eligible Capital account. Examples include:

• Training by a medical practitioner to qualify as a specialist
• A lawyer taking an engineering course unrelated to his/her legal practice
• A professor taking a sideline course to acquire skills in a sideline business

Personal Portion Any portion of the costs that are personal in nature cannot be deducted. Personal costs are assessed on a case-by-case basis using factors such as the duration and location of the course, as well as the number of days in which no training occurred. It is also important that the costs not be misclassified. If they are really convention expenses, you could be restricted to the two-per-year and territorial-scope rules identified earlier.

Location and Duration  Deductibility of expenses will be questioned if courses are taken abroad or in a resort, particularly if you follow up the course with a personal holiday. If equivalent training was available locally, your expenses for the trip to study at the exotic location will likely be considered personal. Costs for expenses of food and lodging will not be allowed for any days in which no training occurred. CRA will make an exception and allow costs for arrival and departure dates as well as weekends. Remember that the costs of claiming food and auto are subject to the normal limitations.

Deductibility of Seminars Are seminars classified as conventions or training courses? This is a question of fact. Conventions generally include a formal meeting of members of an organization or association. Training courses generally have a classroom format and a formal course of study that results in testing and the possibility of certification. Training courses are treated more favourably in that you can attend more than two in a year; however, Interpretation Bulletin 357R2 makes a noteworthy comment: “The total time taken in attending courses in any one year must not be so great as to interfere with the carrying on of the taxpayer’s business. If that happens, expenses will not be deductible.”

Excerpted from Make Sure It's Deductible. © Knowledge Bureau, Inc. All rights reserved.