CPL Tuition Tax Credits

[CPL Student]

Hi Everyone,

I understand that for CPL, we can claim Max 30hrs solo and 35 hours dual for tution tax credit with CRA. Do these hours stated include the night rating also, or can we claim an additional 15hrs for night rating of 10 dual and 5 hrs solo.

Thanks for your feedback.

[linus9]

I claimed all 200 hours including my ppl, multi ifr hours. I was audited by CRA, they asked me to send in my TL11B form, so i sent that in.
A month or two later they sent me a letter saying it was all good.

[Rowdy]

You can claim any of the time through an accredited FTU against your taxes. However, non accredited clubs/rentals and block time cannot be claimed.

[CPL Student]

Wow, I thouhgt you could only claim the Transport Canada minimums for a tax tuition credit being 30hrs solo and 35hrs dual for CPL license. Thats what all the paperwork says that the CRA allows, TC minimums as the tuition tax credit.

That being said, is it these minimums, or 200hrs that one can claim, and is the Night rating part of the minimums or seperate from CPL?

Oh no, now I am confused!!! lol

[nbinont]

Ah, this is a fun question. From the student's perspective, things are clearly summarized in Revenue Canada's P105 (http://www.cra-arc.gc.ca/E/pub/tg/p105/p105-11e.pdf), page 20:

You can claim tuition fees paid to any of the following institutions:
...
B. an educational institution in Canada certified by Human Resources and Skills Development Canada for courses (if you were 16 or older at the end of the year) to develop or improve skills in an occupation;
...

And in page 24:

For you to claim tuition fees paid to a flying school or club in Canada, your school or club has to give you a completed Form TL11B, Tuition, Education, and Textbook Amounts Certificate – Flying School or Club.

Your flight school is probably certified by HRSDC, So just get them to give you a completed TL11B form and dump those numbers in. You're done.

=================================================================

What? That doesn't answer your question about what numbers are eligible for the TL11B form? Ok, you're right. Unfortunately this part is very much open to interpretation.

An in depth read of Canada's Income Tax Act (http://laws-lois.justice.gc.ca/eng/acts ... lText.html) will lead you to conclude that it says nothing special about pilot training (see Section 118.5 for the details). It only insists that fees for tuition must be paid to a HRSDC certified educational institution for the purpose of post-secondary training. But we knew that already.

Now here comes the interpretation, courtesy of Revenue Canada, in their IT516 (http://www.cra-arc.gc.ca/E/pub/tp/it516r2/it516r2-e.txt):

29. Subject to the comments in 8 above, fees paid by or on behalf of students enrolled at flying training schools or clubs certified by the Minister of Human Resources Development (see 2 and 4 above) are eligible tuition fees under paragraph 118.5(1)(a) only if the student is taking flying lessons in order to become a commercial pilot or a professional instructor. Fees are eligible only to the extent that they may be regarded as having been paid for "tuition". Therefore, a student must be under instruction and direct supervision before the cost of flying time is eligible for the tuition tax credit. The Department accepts that a student is under instruction and direct supervision while flying solo; consequently, the cost of dual and solo flying hours required to obtain the following licences or ratings, to the minimum flight training requirements of the Department of Transport, is considered to be part of the student's tuition:

(a) Private Pilot Licence - aeroplane;
(b) Private Pilot Licence - helicopter;
(c) Commercial Pilot Licence - aeroplane;
(d) Commercial Pilot Licence - helicopter;
(e) Instrument Rating;
(f) Flight Instructor Rating;
(g) Night Rating; or
(h) Alternate Landplane or Seaplane Rating.

The minimum dual and solo flying time is currently 45 hours for a Private Pilot's Licence and 65 additional hours for a Commercial Pilot's Licence. Fees for ground school and flight simulators are eligible for the tuition tax credit but costs incurred by a student in flying a personal aircraft while taking a course at a flying training school or club are not eligible.

This is the CRA's interpretation. It's certainly drastically more restrictive than the requirements set out in the law (Income Tax Act). I know many flight schools read "to the minimum flight training requirements of the Department of Transport" to mean 200hrs for CPL, some take it to mean to the minimum number of hours to be able to pass the flight test (as that is a minimum requirement from TC, and your instructor could say you need more flight time to get the required recommend letter).

But they are all interpretations. If push comes to shove, you could argue a different interpretation of the Income Tax Act. Probably not worth it - just take the form you get (it's probably reasonable already), and use that.

[spaner]

Like 5 guys look'en at the goffer hole mid-field...

After you get ALL of that figured out, drop it into a desk drawer and forget about it for 5 years.

That's when you'll use it to pay off the last of the loan...

[Stephen Szikora]

The Form TL11B states it more clearly:

Eligible tuition fees do not include costs or other fees incurred that relate to the use of an aircraft to get flying experience over and above the minimum hours required to obtain your rating or licence.

If you look at the form, there is no field for number of hours, only for the amount of tuition paid for each of the various licenses or ratings. If your flight school got it wrong and included fees for greater than the minimum required hours dual and solo and the auditor didn't catch that, you got away with one. Remain nervous for 3 years because that is the normal period in which CRA can reassess your claim. After 3 years, you are in the clear.

(I decided to go to law school and became a tax lawyer instead of becoming a commercial pilot!)

[CPL Student]

Thanks everyone

So can the night rating be counted towards eligible tuition tax credits on its own or is it covered in the cpl maximums of 30 solo and 35 dual hrs

[crunchiespg]

But isn't 200 hours the required minimum to actually get your cpl? If so surely you can claim it all as its necessary for the commercial licence.

[Stephen Szikora]

Nope ... that's the amount of experience required, not the amount of instruction. Tuition fees means instruction hours and CRA has interpreted this to be the required number of dual hours and the required number of solo hours to be flown under the supervision of an instructor.

With regard to the night rating portion, you would be obtaining it as part of the commercial required training hours, not on top of it. Ditto on a a VFR-OTT rating, which is also included in the CPL syllabus. As a PPL with night and VFR-OTT ratings, I've often wondered what I would do if I went for a CPL ... probably eat a lot of hamburgers!

Here's a good explanation of what can be claimed from the Ottawa Flying Club:

The minimum requirements for a licence or a rating outlined in the Canadian Aviation Regulations is the maximum you can claim.
- For a Private Pilot's Licence the total minimum dual and solo flying requirement is currently 45 hours. Any combination of dual and solo hours is acceptable to a maximum of 45 hours total.
- For a Commercial Pilot's Licence, 35 dual and 30 solo additional hours may be claimed.
- For a rating, only the Transport Canada minimum training requirements may be claimed.
- Fees for ground school and flight simulator are eligible for the tuition tax credit.
- Costs incurred by a student in flying a personal aircraft while taking a course at a flying training school or club are not eligible.
No credit may be taken for time building or hours in excess of the Transport Canada minimums.

[CPL Student]

Thanks Stephen and everyone else for all the details.

It's really interesting how there is a lot of "vagueness" around this whole tuition tax credit process. One thing I have deducted for sure is in alignment with what Stephen has said that you can claim for a Commercial Pilot's License 35hrs dual and 30hrs solo.

Regarding additional ratings, Stephen outlines that Night Rating is part of the CPL standard syllabus, and as such cannot be claimed for additional tuition tax credits over and above the CPL hours of 35 dual and 30 solo. I tend to agree with this in principle, however, it is not written anywhere from CRA that one cannot claim Night Rating over and above CPL hours. All it states regarding ratings is “For a rating, only the Transport Canada minimum training requirements may be claimed”. So if Night were to be claimed over and above CPL, that would open up an additional 5 hrs solo and 10 dual that could be claimed in one’s training towards tax credits. Also, a few people I have spoken to in the industry have stated that they claimed night rating over and above CPL without any issues.

I know I am splitting hairs here but if there are any other opinions, I am open to hearing them.

Thanks as always. Great group of aviators in this forum

[watermeth]

finding a good accountant is the best thing to do to answer your question.
as far as I know, your hours flown in order to obtain a CPL are all deductible. concerning your night flying and other hours, it can be deducted next year and the years thereafter.

[Stephen Szikora]

Now why would you go out of your way to find a "good accountant" when you have a perfectly good tax lawyer right here?

[nbinont]

Eligible tuition fees do not include costs or other fees incurred that relate to the use of an aircraft to get flying experience over and above the minimum hours required to obtain your rating or licence.

This statement you quoted does not seem to support your argument that the "experience" portion of the 200 hours is not claimable. Read it closely - experience hours over the minimum required for the rating are not claimable. Why not just say all experience hours not supervised by an instructor are not claimable? But that's not what it says.

As a lawyer, I'm sure you realize that the law (Income Tax Act) is what matters. After that, a court case may provide a precedent guidance (at least outside of Quebec). Anything else devolves to an argument about interpretations.

Another thought: Assuming you were a SE-CPL and wanted to take training to be able to fly Multi to get a new position. This is clearly training for an occupational skill, but has a 0 hour requirement from TC. How much of that Training should be claimable? Yes, one can bureaucratically run through CRA's interpretation, but is that really what the law says? Is this reasonable?

[nbinont]

... Night Rating is part of the CPL standard syllabus, and as such cannot be claimed for additional tuition tax credits over and above the CPL hours of 35 dual and 30 solo. ...

Really? Then why does CRA explicitly list in under 29.(g) in IT516 if it can't ever be claimed over and above the CPL hours? And we all know you do need a CPL for any sort of Pilot occupation... Could you possibly get a Night Rating and claim it for your occupation, but never get a CPL? I'd hope not!

[nbinont]

Hmm, reading the Income Tax Act and interpretations reminds me of some other set of fine prose - what's it called again - yah the CARs! Almost feels like the authors live in the same city or something

[Stephen Szikora]

Really? Then why does CRA explicitly list in under 29.(g) in IT516 if it can't ever be claimed over and above the CPL hours? And we all know you do need a CPL for any sort of Pilot occupation... Could you possibly get a Night Rating and claim it for your occupation, but never get a CPL? I'd hope not!

When the Interpretation Bulletin IT-516 was written, yes you could. First, understand that an IT bulletin is not legislation but rather nothing more than CRA's interpretation of the legislation - a form of guidance on how they will view things. IT bulletins are useless in Court and not even binding on CRA! What matters are the Income Tax Act, any Regulations made under the ITA, and precedent decisions of the Court.

Once upon a time, CRA allowed people to claim PPL training costs up to 35hrs (later 45hrs when the requirements changed) provided you "declared" that you were taking the training in order to become a commercial pilot. You could subsequently go on to obtain a night rating, a multi-engine rating or a seaplane rating (there was no VFR-OTT rating) and claim those costs as well, again declaring you working on becoming a commercial pilot. Later, you might have continued on to get the CPL. Now, CRA has tried to tighten up the administrative requirements. Essentially, they have said that the only proof that you intend to become a commercial pilot they are willing to accept is the actual registration in a commercial pilot training program. You can't even claim your PPL costs until you take this next step. In fact, they won't even accept that unless you have already obtained a Class 1 medical. As a result, there no longer will be people in the position where they are claiming for a night rating having never enrolled in a CPL program.

Can CRA do this? Technically, no. You can make your claim for any costs you feel appropriate under the Income Tax Act. You don't even need a TL11b. CRA will of course deny your claim, you can appeal, be denied again, and take then your case to the Tax Court. Once in front of the judge, you will have to convince the Court that your interpretation is to be favoured over that of CRA. I did a quick check of the Tax Court decisions and couldn't find anything in the past 15 years where someone went this far.

Some have said they claimed all the expenses up to 200hrs. As I indicated earlier, they simply got away with it. We live in a system where we self-declare and are subject to subsequent audit. Not everyone gets caught. Also, as I said earlier, the TL11B does not indicate hrs, only dollar amounts and dates of training. A clerk at CRA might look at it, simply input the amounts or, a clerk may never actually look at it if you file electronically. But it is always open for CRA to ask for more detail at the time you file or within 3 years of filing. The flight schools don't want to get in trouble themselves for preparing a false information return (they can be fined by CRA for that) so the are reluctant to issue a TL11B other than on the strict guidance provided by CRA. Nevertheless, based on the experience of some, I'm guessing there are cases where the admin person at the school simply doesn't know what CRA's position is, issues it for the full 200hrs, the student claims it and is just not caught (yet.)

[crunchiespg]

but could one not argue that if you set out on pilot training with 0 hours and your sole intention is to get a CPL and then a job once qualified, that the requirement is the full 200 hours? As you cannot get your CPL without 200 hours, and if you are solely flying to build 200 hours for CPL then those 200 hours are all expenses towards a job related qualification.

[CPL Student]

Wow, thanks everyone. Thats a mountain of info.

Well I'm just a regular guy, no accountant or legal tax expert. I also want to stay within the rules around this issue. As such, it sounds like Stephen's interpretation is the one to go with. A fellow pilot, and a lawyer, bonus, I appreciate the guidance!

As such, I will claim my CPL training and only use Tuition Tax credits for CPL up to 35 hrs dual and 30 hrs solo. I will not claim Night rating over and above the standard CPL limits. In other words, I just wont claim night at all. Stephen please let me know if this makes sense or if I have misunderstood what you have said.

I know some will say I should claim it over and above, but I prefer to sleep at night and not be worried about an audit to which I would have to defend in court.

Thanks again Stephen and everyone else for all your tips.

Regards.

[CPL Student]

Hi Folks. Well I'm filling out the CPL paperwork today for tuition tax credit. I have decided not to include night rating training as incrmental since it is offically already part of the CPL Syllabus.

Any other 11th hour thoughts before I proceed!!!!!

Hoping for clear skies, this weather is awful!

Cheers,