Many employed tradespeople must provide their own tools as a condition of employment. In recognition of this, an employed tradesperson is entitled to deduct the total cost (in excess of $1,000) of eligible new tools acquired in a taxation year, up to a maximum of $500 for that year.
An eligible tool is a tool that is acquired by the taxpayer for use in connection with the taxpayer's employment as a tradesperson that has not been used for any purpose before it is acquired by the taxpayer. Electronic communication devices and electronic data processing equipment will not qualify as eligible tools.
Your employer must certify the conditions of your employment on Form T2200 Declaration of Conditions of Employment to verify your eligibility to claim the cost of tools. The Canada Revenue Agency does not require you to file the form with your tax return; however you must retain it in case they wish to see it.
The tradesperson will also be eligible for a rebate of the goods and services tax/harmonized sales tax paid on the portion of the purchase price of the new tools that is deducted in computing employment income.
Information for Tax Tips is provided as a public service by the Chartered Accountants of British Columbia.