An apprentice hair stylist spends $1,400 on tools and $50 on supplies such as shampoo to do the job. Are they considered a tradesperson for the purposes of the tradesperson deductions in the Income Tax Act? Can these costs be written off?
This was a question that I was recently asked and interestingly enough the same question was posed to the CRA last year.
What Is A Tradesperson
The Income Tax Act does not define the term tradesperson and the ordinary, everyday meaning must be used. Relying on the Oxford Concise Dictionary (8th edition) the CRA has takes the view that a tradesperson is:
a person engaged in trading or a trade, esp. a shopkeeper or skilled craftsman” and a “trade” as “a skilled handicraft esp. requiring an apprenticeship.
Since a hairdresser would be required to complete an apprenticeship and are included in formal apprentice trades programs, the CRA has taken the view that a hairdresser would generally be considered a tradesperson.
Supplies Used By Hairdressers
An employee may only deduct the cost of supplies if they are required to pay for the supplies, the supplies are used directly in their work, the employee did not receive a reimbursement, and the employer has completed and signed a copy of form T2200.
- Provided the above conditions were met, then the cost of shampoo, conditioner and other supplies may be deducted for tax purposes. But this does not include the cost of tools.
Tools Used By Tradespersons
The Income Tax Act allows tradespersons to deduct the first $500 in excess of $1,000 of eligible tools (including sales taxes). An eligible tool includes:
- A tool acquired by after May 2, 2006 for use in connection with employment as a tradesperson;
- has not been used for any purpose before it is acquired by the taxpayer;
- is indicated as required in for T2200, and
- is not an electronic communication device or electronic data processing equipment.
Thus the cost that exceeds $1,000 of blow dryers or other tools required may be deducted to a maximum of $500.
Do you have a question about the tradesperson deduction? Consider asking your question or leaving a comment in the comment box.