Professional licensing exam fees - tax deductable?

[cattlerepairman]

To the tax gurus:

In order to ENTER my profession, I have to pass proficiency examinations (aimed at having the professional body here in Canada recognize my credentials from abroad).

I am working in my professional field, but not in the regulated speciality I am about to enter.

Can I deduct the (considerable) expenses for the proficiency examinations for income tax purposes? If so, where?

Many thanks!

[Thalo]

I think you should be able to.

I'm deducting my CFA enrollment expense, we'll see how it goes.

[Jucius Maximus]

I think you should be able to.

I'm deducting my CFA enrollment expense, we'll see how it goes.

Not correct. You can only deduct the normal membership fees you are required to pay.

You CANNOT deduct fees for initiation, examinations, etc.


Annual membership dues do not include initiation fees, licences, special assessments or charges for anything other than the organization's ordinary operating costs. You cannot claim charges for pension plans as membership dues even if your receipts show them as dues.

(source (http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines206-236/212/menu-e.html))

[cmackie]

From the CRA website (http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines300-350/323/eligible-e.html)...

Generally, a course qualifies if it was taken at the post-secondary level or (for individuals aged 16 or over at the end of the year) it develops or improves skills in an occupation at an educational institution that has been certified by Human Resources and Social Development Canada (HRSDC).

If your fees were paid or reimbursed to you by your employer, you can claim them only if the payment or reimbursement was included in your income.

For you to claim tuition fees paid to an educational institution in Canada, the institution has to give you either an official tax receipt or a completed Form T2202A, Tuition, Education, and Textbook Amounts Certificate.

---
Things like driving school or the Canadian Securities Course qualify. I'm not sure about something like the CFA since the organization is based in the US. Does anyone know more about this?

[cattlerepairman]

From the CRA website (http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines300-350/323/eligible-e.html)...

Generally, a course qualifies if it was taken at the post-secondary level or (for individuals aged 16 or over at the end of the year) it develops or improves skills in an occupation at an educational institution that has been certified by Human Resources and Social Development Canada (HRSDC).

If your fees were paid or reimbursed to you by your employer, you can claim them only if the payment or reimbursement was included in your income.

For you to claim tuition fees paid to an educational institution in Canada, the institution has to give you either an official tax receipt or a completed Form T2202A, Tuition, Education, and Textbook Amounts Certificate.

---
Things like driving school or the Canadian Securities Course qualify. I'm not sure about something like the CFA since the organization is based in the US. Does anyone know more about this?

To clarify: The proficiency examination is held at an approved Canadian university, the examiners are university staff and the payment for the exam is made to the professional licensing body. I received a receipt for the payment, but no special tax forms. We are talking about a post-graduate level examination.

My hunch is that it should qualify for tax deduction; it is a significant step to improve professional qualifications, but I want to make sure I fill the tax forms out correctly! Where would I put it as a deduction, if you guys agree that it qualifies?

[p51dray]

I write actuarial exams and from my research I do not believe that you are allowed to claim exam fees for deduction. There are 3 places that seem like you might be able to claim them:

1) Annual union, professional or like dues - Line 212

Annual membership dues do not include initiation fees, licences, special assessments or charges for anything other than the organization's ordinary operating costs. You cannot claim charges for pension plans as membership dues even if your receipts show them as dues.

http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines206-236/212/menu-e.html

2) Tuition fees - Line 320 (Schedule 11)

For you to claim tuition fees paid to an educational institution in Canada, the institution has to give you either an official tax receipt or a completed Form T2202A...

http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines300-350/323/eligible-e.html

3) Education and Textbook Amounts - Lines 321-322 (Schedule 11)
Again you'll need a T2202A.
http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/reviews/adjustments-e.html#education_amounts

I don't think you should risk it.

[dutchca]

To clarify: The proficiency examination is held at an approved Canadian university, the examiners are university staff and the payment for the exam is made to the professional licensing body. I received a receipt for the payment, but no special tax forms. We are talking about a post-graduate level examination.

My hunch is that it should qualify for tax deduction; it is a significant step to improve professional qualifications, but I want to make sure I fill the tax forms out correctly! Where would I put it as a deduction, if you guys agree that it qualifies?

Key word is "hunch" - they aren't deductible, they don't qualify. Fees for writing and attending the School of Accountancy and for writing the Uniform Final Exam are not deductible - annual dues are.

You can try it, you are welcome too in the self-filing tax system we have here in Canada - but I wouldn't be surprised if the CRA comes knockin especially if the amounts are significant as you seem to indicate. If you get a tuition slip from the provider that indicates they can be claimed - but I doubt you will get a slip.

The only other place I know of is L212 - see post by Jucius above for the skinny on that one.

You may want to ask others in the same boat if they are claiming it and how, or ask the "professional licensing body".

My hunch is that you (and Thalo above) are out of luck. You are welcome to try - and you may never get asked about it - by my gut feeling is that you are SOL.

[Jucius Maximus]

Here is another question on the same topic: I do have some professional association dues that I can legitimately deduct on my tax return.

Can I deduct the whole amount I paid including the GST, or can I only deduct the base amount?

[Thalo]

I'm gonna do it anyway. 15% tuition credit on a $1000 amount isn't enough to make it worthwhile for them to audit me.

Anyway, it "develops or improves skills in an occupation"... how do I find out if something is HRSDC approved? I think Canadian Securities Institute courses are eligible if you pay for them yourself (think they even issue tax receipts), no reason CFA shouldn't be.

[dutchca]

Here is another question on the same topic: I do have some professional association dues that I can legitimately deduct on my tax return.

Can I deduct the whole amount I paid including the GST, or can I only deduct the base amount?

I have always included the GST, unless you get it back through the Employee/Partner GST rebate (GST370). If you aren't filing that form, include the GST.

BTW - if you aren't getting reimbursed for professional dues by your employer - you should be. If you get reimbursed and are still claiming - you are brave!

[dutchca]

I'm gonna do it anyway. 15% tuition credit on a $1000 amount isn't enough to make it worthwhile for them to audit me.

Anyway, it "develops or improves skills in an occupation"... how do I find out if something is HRSDC approved? I think Canadian Securities Institute courses are eligible if you pay for them yourself (think they even issue tax receipts), no reason CFA shouldn't be.

I am going to snitch on you.....lol.

Beauty of our tax system is that you can claim pretty much anything you want. Just have your ducks in a row if they ask for additional information...which may not even happen.

[cmackie]

If you're unsure at all, I'd say it would be worth spending a few minutes (most probably waiting on hold) actually calling the CRA or even the HRDC. That being said, three different people gave me 3 different answers for something unrelated the last time I spoke to them.

[Thalo]

I am going to snitch on you.....lol.

Beauty of our tax system is that you can claim pretty much anything you want. Just have your ducks in a row if they ask for additional information...which may not even happen.

Yeah, I figure as long as I claim all the little things, like interest on my checking account, they'll consider me to be very honest and compliant and probably won't audit me. If it does become an issue, at least I can argue the fact that CSI courses are tax deductible, why wouldn't CFA be?

[Jucius Maximus]

BTW - if you aren't getting reimbursed for professional dues by your employer - you should be. If you get reimbursed and are still claiming - you are brave!

My employer does not reimburse me but I will be getting on their case about that ... :)

[Kerby]

I just called the Minister of Human Resources and Skills Development and CFA is NOT listed as one of the educational institutions certified for tax credit purposes.

[Kerby]

Please follow below link:

http://www.cra-arc.gc.ca/E/pub/tp/it158r2/README.html

and note last paragraph:

8. Dues paid by students before becoming members of a professional organization are not allowable under subparagraph 8(1)(i)(i), but may qualify as tuition fees under paragraph 60(f) for 1987 and prior years (see IT-82R3) or in computing a tuition tax credit under section 118.5 for 1988 and subsequent years (see the current version of IT-516).

[MichaelKnight]

The year I finished school I wrote an licensure exam and did my own tax return that year. I had claimed this under 'professional dues'. The following year I had an accountant complete my return. He reviewed my previous return and said I wasn't really allowed to claim the exam/licensure fees. His reasoning being you aren't a professional yet w/o the exam and thus can't claim it as professional dues. Seems a little counter intuitive to me as it goes toward earning a living, especially considering the many moving/relocation expenses one can claim 'to earn income'.

[Capt.]

Kerby the link you gave is not what we are talking about here. IT-158R2 is discussing "annual professional membership dues" and not exam fees. I'm about to call the CFA institute right now to see if I can get any info because I couldn't find any forms on their site.

[Jucius Maximus]

The year I finished school I wrote an licensure exam and did my own tax return that year. I had claimed this under 'professional dues'. The following year I had an accountant complete my return. He reviewed my previous return and said I wasn't really allowed to claim the exam/licensure fees. His reasoning being you aren't a professional yet w/o the exam and thus can't claim it as professional dues. Seems a little counter intuitive to me as it goes toward earning a living, especially considering the many moving/relocation expenses one can claim 'to earn income'.

Look at the link I posted in Post #3 and you will see that exam fees are not deductible in any situation, even if you are already a professional.

[jefguth]

There are some limited situations where exam fee's can be deducted. Here is an example from the Canadian Medical Association:

Examination Fees
Examination fees paid to the Medical Council of Canada (LMCC Part I and II) are for the purposes of being examined to qualify for licensure rather than being an integral part of a course of study. As such, they are not eligible for the tuition tax credit and repeated attempts to claim them have been denied. Similarly, examination fees paid for the United States Medical Licensing Examination (i.e., USMLE Parts I, II, and III) have been disallowed.

A unique opportunity may be available for those residents who perform limited locums during their training to earn business income. One of the criteria for a limited locum license is often successful completion of the LMCC Part II Examination. In such circumstances, the cost of the LMCC Part II Examination may be deductible against business income earned from the locum tenens. If this situation is applicable to you, see a tax accountant.

Examinations at completion of a residency program (e.g., CCFP exams at the end of Family Medicine or FRCPC at the end of another specialty) are deemed to qualify an individual to practice in a particular specialty. The costs of these exams can be viewed as an initiation or admission fee to practice and may be considered by the CRA to be eligible capital expenditures rather than a current year expense and thus eligible for depreciation over a period of years. This is a controversial area and a tax specialist should be consulted.

Annual dues you pay to the Royal College of Physicians and Surgeons or the College of Family Physicians of Canada that are necessary to maintain professional status are generally deductible in the current year.

[mr_raider]

I'm a licensed physician, so here is what I did:

I deducted exam fees at the end of medical school paid to several canadian and US licensing bodies, but I later found out that was disallowed, since i was not earning professional income.

I was however able to deduct my exam fees in my final year of training, because I then entered practice and started earning professional income. According to my accountant, many of these expenses can be brought forward and deducted in your first year of earning professional income. I think the limit is 2 years but you need to check that.

I stress that this only applicable if you earn professional income (i.e. self employed), and not salaried.

[mugs_64]

So just clarifying this, i'm able to claim my annual fee to certified in my professional body?

[mr_raider]

So just clarifying this, i'm able to claim my annual fee to certified in my professional body?

Yes, if it is obligatory (i.e. Quebec College of physicians) and you are self employed, not salaried. Then it is considered an expense incurred to earn business income.

Union dues are also deductible, although I don't know how that applies to salaried workers.

[Capt.]

Well I called the CFA people and they said they can't give me a tax form. The lady offered to mail me a receipt printed on CFA Institute letterhead. From looking at one of the links provided, it looks like if you can get them to fill out form TL11D (http://www.cra-arc.gc.ca/E/pbg/tf/tl11d/tl11d-07e.pdf).

Thalo, it says right on that form that you don't need to send it in with your tax return, just need to keep it for proof. So that would buy you some time to send it to CFA and have it come back filled out, if they'll do that for you.

edit: just talked to someone at the CRA and they said it's not on the list of eligible institutions, therefore it's not allowed. But the lady insisted it was the "certified" FA in Canada, not chartered so I think she might not even know. It's definitely chartered FA wherever you are. The website says to go into your local tax office to check the list so you could always try that as well.

Sorry for the hijack OP!

[usdm_b18]

I'm sorry to continue with this CFA thing, however was there any resolution as to weather or not we can claim it?

[dutchca]

Sure - you can claim it. If you are asked by the CRA to provide back-up it will be disallowed.

It is the individual's choice of whether to spin the wheel....

[MoreMiles]

Sure - you can claim it. If you are asked by the CRA to provide back-up it will be disallowed.

It is the individual's choice of whether to spin the wheel....

Just be prepared to return that portion of tax when there is a notice of re-ax. The chance of getting asked documents for "moving expenses and tuition / exam fee" is very high. It does not take a full audit. CCRA will simply ask for those receipts... then send you a NORA... with an invoice.

Tax deadline Apr 30, NOA comes around June, document request comes around August, NORA comes around Sept / Oct... be prepared to pay around that time.