Principal Issues: Does the Income Tax Act allow an employed tradesperson to deduct the cost of tools and related expenses?
Position: The 2006 Federal Budget proposes to recognize a deduction for the cost of eligible new tools acquired by an employed tradesperson after May 2, 2006
Reasons: The deduction will be limited to the lesser of $500 and the amount by which the total cost of the new tools acquired in the year exceeds $1,000.
Signed on July 13, 2006
XXXXXXXXXX
Dear XXXXXXXXXX:
Thank you for your correspondence received on May 17, 2006, in which you ask why the Income Tax Act does not allow an employed tradesperson to deduct the cost of tools and related expenses.
I am pleased to inform you that the 2006 Federal Budget proposes to recognize a deduction for the cost of eligible new tools acquired by an employed tradesperson after May 2, 2006. The deduction will be limited to the lesser of $500 and the amount by which the total cost of the new tools acquired in the year exceeds $1,000. The Budget also proposes to introduce a new Canada employment credit in recognition of work-related expenses incurred by employees. The new credit will take effect July 1, 2006, and will provide tax relief on the lesser of $500 ($250 for 2006) and the individual's employment income for the year.
I appreciate the opportunity to respond to your letter and trust that the information provided will be helpful.
Sincerely,
The Honourable Carol Skelton, P.C., M.P.
Randy Hewlett
957-2049
2006-018809