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Tuition credit vs. business expense

This might be a stupid question, but is there anything in the ITA preventing a sole proprietor from claiming both a business expense and tuition credit for training? In this case, a yoga instructor takes a course with a yoga instruction business (which is a designated educational institution and issues T2202A’s). What’s preventing her from claiming the amount paid as a business expense and a tuition credit?

Pretty sure she could not claim the tuition credit if she claims it as a business expense – no cost, no expense. When I reimburse
my staff for training I make it a Taxable Benefit so they can claim it along with the tuition credit.

Gay Wise

gaywise@wisefinancialservices.ca

250-743-5999

1757 Shawnigan Mill Bay Road

Shawnigan Lake, BC, Canada

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I suspect CRA would certainly frown on this kind of double dipping! However, there probably is nothing to prevent her from doing this if she has no conscience and no fear of CRA.

Because there is nothing preventing us from doing something, does not make it right. I deposited a cheque using the cell phone deposit app then dropped the cheque in my overnight bag without indicating that it had been deposited. 6 weeks later, I found the cheque in my bag and deposited it again. My customer does not have a phone so I received a letter several weeks later, expressing surprise that the cheque had been cashed twice. I was terribly embarrassed but there was nothing preventing me from doing this.

If you were reimbursed - ie NO TAX BENEFIT, then you can not claim the tuition expense.

You cannot claim the tuition amount on your tax certificate if any of the following applies to you:

  • the fees were paid or reimbursed by your employer, or an employer of one of your parents, where the amount is not included in your or your parent’s income

  • the fees were paid by a federal, provincial, or territorial job training program, where the amount is not included in your income

  • the fees were paid (or eligible to be paid) under a federal program to help athletes, where the payment or reimbursement has not been included in your income

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-323-your-tuition-education-textbook-amounts/eligible-tuition-fees.html

1 Like

I concur with Dominique. You can’t claim the T2202 if the cost was reimbursed.

Beyond that, I have a few professional clients with a similar situation and so far it’s always better to claim as a business deduction: it keeps taxable income at the lowest marginal tax rate and also often reduces CPP on self-employment.

I’m not sure I agree. If you look at the first bullet of the post by @dominique_dabolczi, it says that you can’t claim the tuition where “the fees were paid or reimbursed by your employer … where the amount is not included in your … income”. By declaring a taxable benefit on the T4, @gaywise is including the tuition in the employee’s income. I don’t know where these bullets came from but just looking at the wording contained there, the employee should be ok to claim the tuition.

The bullet points came from CRA’s website.

And CGTax situation is that of a sole proprietor, not an employee. If his client claims the tuition as a training expense on T2125, that’s the equivalent of a reimbursement by the business and he can’t claim the tuition tax credit.

I agree with @kevin. This is exactly how MNP reported it when I was working for them and taking CGA classes. As the employer, MNP would have deducted it as salary expense or employee benefits paid. The taxable benefit was included on my T4 slip, so I included the “reimbursement” in my “income”, and I was able to use the T2202A.

However, @CGTax describes a situation where the client is both employer and “employee”. As such, if the client wants to use the T2202A, she would have to report an equal amount of income on her T1 (i.e. via T4 slip from her own business, or Other income, etc). That is, she would have to report both or neither.

If she reports “both”, the T2202A deduction may not be enough to offset the additional tax payable on the amount of income. If she reports “neither” she will probably be better off (less tax to pay).

Either way, the payment could still be a legitimate business expense, included on the T2125.