training bond...tax deductible?

[Jack Klumpus]

Ex: broke the training bond, and had to pay the remainder.

Can this be claimed on your taxes? If so, where and how did you claim it?

Thanks.

J. Klumpus

[Doc]

No. It would be a tax deduction if you actually "paid" for your training, as with a flight school. ie. you were not getting it back. Really nice try though. In case you get a bunch of conflicting opinions, I used to run a tax service.

If it were a deduction, you'd have to pay tax on it when the company (ie. maggots) paid it back to you. Make sense?

[Bede]

I deducted mine - professional income. Make sure you have some professional revenue though. I did this about 5 years ago and CRA hasn't said anything, even though I was audited. If they don't like it, you can appeal to the Tax Court of Canada.

[WhatThe?]

Yes you can,

It comes under employment expense instead of school, get an accountant for this one. Mine had no problem, and never heard from the taxman.

Make sure you have the contract and a receipt for the bond payback. Voila... reduced income.

Good luck

[Doc]

Yes you can,

It comes under employment expense instead of school, get an accountant for this one. Mine had no problem, and never heard from the taxman.

Make sure you have the contract and a receipt for the bond payback. Voila... reduced income.

Good luck

But, you'll be taxed on it as "added" income when you get it back. Don't piss with these folks. They can, and sometimes will come after you years down the road. If you deducted it going in, you pay tax on it coming out.

[KAG]

Call CRA and ask them. You might be supprised what you find out...

[teacher]

I deducted mine and it got approved. I recieved a letter from my former employer stating that it covered the cost of my training. I put it under education expenses.

[Jack Klumpus]

Thanks for the replies.

The way the contract worked was sign a bond for x amount of years and y amount of dollars. Pro-rated for the duration. Leave prior to x years, and pay back the remaining.

I claimed the remainder as an education expense. It got declined, due to the charter company not being a recognized training facility, which it isn't.

@ Doc: What you said was also said to me by the revenue agency.

@ Bede: I had income from said company, working as a pilot, and had professional income with the airline I moved to. Would this suffice?

@ WhatThe?: I will look into that, since I have a copy of my contract, and a receipt saying I paid the remainder. Thanks.

@ Teacher: When did you do this? and under what section of education did you put this in? I tried to place it under education, but each and every single way it got denied.

[Bede]

Professional income is similar to contract income. So if you get some added money on the side (I do because I still instruct), you write it off.

[Jack Klumpus]

@ Bede: The only income I recieved during my time there, was from said company.

[wallypilot]

No. It would be a tax deduction if you actually "paid" for your training, as with a flight school. ie. you were not getting it back. Really nice try though. In case you get a bunch of conflicting opinions, I used to run a tax service.

If it were a deduction, you'd have to pay tax on it when the company (ie. maggots) paid it back to you. Make sense?

I think you must have misunderstood the question Doc.

unfortunately, you're not correct. The portion you paid is tax deductible, but not the entire amount of the bond. Get your employer to sign form T2200 "Conditions of Employment". On that form, there is a box to tick saying you were responsible for training costs. The employer needs to issue you a receipt for the amount you paid, and voila, you deduct it as "Other Employment Expenses". You won't get any hassle from CRA claiming it in this way. Just have the receipt to back up the amount of the claim, and the T2200 signed and filled out properly by the employer to prove you are allowed to claim it. If you had to pay for charts and approach plates it would fit in here as well.

[. ._]

Oh man, what a sick world we live in when we have to ask if we can deduct the expense of buying the right to put food on the table.

WHAT THE @#$!?!?!?

-istp

[wallypilot]

there's no doubt that income taxes are ridiculously complex and stupid. But humans are, for the most part, if not complex, definitely ridiculously stupid....so at least the world is consistent.

[wallypilot]

Here, I'll repost this from last year. It's a pretty comprehensive list of the tax deductions available for most pilots. Self Employed, would, of course have many others. this is for employees.

There's not that many tricks.

Basically:

1.Did you have to move for your job? If yes, you can deduct moving expenses. http://www.cra-arc.gc.ca/E/pbg/tf/t1-m/README.html The total goes into line 219.

2. Did you get paid per diems in your job? If no, you can claim up to $51 CDN per day in Canada, but you must have a signed form from your company. Use Form TL2 at the following link. http://www.cra-arc.gc.ca/E/pbg/tf/tl2/README.html

Also keep in mind that if you were paid per diems, but less than $51 per day, you can claim the difference up to $51 per day. For example, your employer pays $30 per diems. You work 200 days in the year. you can claim another $21 per day, or $4200. this then gets cut in half, and your claim will be $2100 entered in the employment expenses part of the income section of the T1. Note that the TL2 has to be signed by your employer. this verifies the amount of per diems they paid you. Same goes for if you were working to the US, claim $51 USD per day. Canada Revenue Agency has an average exchange rate for the year, and for 2007 it was 1.07478127 CAD per 1.0 USD. See this link for the rest of the main currencies: http://www.cra-arc.gc.ca/E/pub/tg/rc4152/rc4152-e.html All amounts claimed must be converted to CAD.

3. You can deduct the cost of Charts, Approach Plates, Uniforms, Cost of your Medical Examination, License Fee, and even Headsets if you can get a note from your doctor saying that a headset is required to protect your hearing. (this shouldn't be a problem). all of these items get added up and entered as one total in the employment expenses section. (You need form T2200 signed by the employer saying charts, etc were necessary for performance of duties. But even if you can't get that, I would claim it anyways, as it's a pretty common claim by pilots, especially at smaller companies).

4. If you paid out a training bond, get a form from your employer stating that training costs(and the other costs above like charts, etc) were required for employment. Form T2200. http://www.cra-arc.gc.ca/E/pbg/tf/t2200/README.html.

5. Northern living allowance if you live north of 60 degrees. T2222 http://www.cra-arc.gc.ca/E/pbg/tf/t2222/README.html

6. Overseas Employment Tax Credit if you spent more than 6 CONSECUTIVE months working outside of Canada for a Canadian company. this is form T626. this also must be signed by the employer. This is potentially a huge tax credit. http://www.cra-arc.gc.ca/E/pbg/tf/t626/README.html This does not have to be in one tax year, but if it crosses tax years, you can't claim the credit until you have surpassed 6 months working outside of Canada. Example: Start working in africa in october 2006. don't come home other than for vacation until April 2007. you can't claim this until you file for the 2007 tax year(which would be march 2008). What you do is go back and re-file your 2006 return with the T626 that you would have had your employer sign at the end of the 2007 tax year. So the credit staddles 2 tax years, but I have never had a problem refiling the previous year. they even pay you the interest on the money that they would have owed you after the 2006 tax year.

That's about it. Take all these items that you qualify for into H&R Block and they'll do it for $50-$100 or so.

Add to that the normal stuff:

Deductions: RRSP, Kids, Interest paid on investment loans, dependent spouse, basic personal amount (varies by province)
Income sources: Employment income, income from investments (dividends, interest, rent from a rental property)

You know what, it's really not that difficult, just very tedious.

If you have some specific questions, send me a pm.

cheers
wp

[Conquest Driver]

It may boil down to a questions of "Was interest payable on the bond?" If you had to pay tax on the income, then any loss should be deductible. Unfortunately this assumes the absolute worst kind of bond, the cash up front kind.

[Tim]

a note on wally's post, re headsets. you shouldn't need a medical note for a headset as it is a work expense, not medical expense...although once you have the note i guess you can say its a medical expense, however you can't claim the first ~$250 IIRC of medical expenses. stick with the T2200 work expense form and you'll get a few extra bucks back.

its seems with everyones conflicting answers about taxes the CRA is just like TC...the decide region to region and person to person what they will and will not allow.

[Tim]

oh one glaring differnce i've notice with the CRA vs TC...when you call the CRA with a direct question they are usually very helpful and give you a concise answer...just don't call too late into tax season or you'll be on hold for an hour.

[Jack Klumpus]

Thanks for re-posting that post of yours. I'll see if they'll fill out the T2200.

[JAHinYYC]

Thanks for re-posting that post of yours. I'll see if they'll fill out the T2200.

If you go the T2200 route you will only be able to claim the expense as an education costs which generates a non refundable tax credit of 17% of the amount claimed. Thus $5000 in bond costs looks like $850 tax credit which offsets other taxes you have paid.

If you can get your former employer to sign a T777 (and if they will sign at T2200 they probably will sign the T777) you can deduct the $5000 as an "employment expense" (basically something which the employer required you to pay for in order to earn income) at which point the $5000 comes off the top line of your net income (much like how an RRSP contribution is deductable).

Assuming you made more than $40,000 this is more advantageous since the implied value of the tax savings is greater than the 17% allowed under the T2200 route.

I instruct part time and deduct the cost of annual rides and recurrent training using the T777 route. Since I generate lots more money from my day job and am taxed at the highest marginal tax rate for Alberta (40%)...the difference is substantial.

Using $5000 training costs:
a) The T2200 route gets me $850 back
b) The T777 route gets me $2000.

[godsrcrazy]

Oh man, what a sick world we live in when we have to ask if we can deduct the expense of buying the right to put food on the table.

WHAT THE @#$!?!?!?

-istp

I think he is asking if he can deduct the expense of Breaking your WORD. He obviously agreed to stay for a period of time and did not.

[Jack Klumpus]

With regards to the T777 form, have you been using the "Other expenses" column? If so, do you specify by sending an attached letter of explanation?

[Jack Klumpus]

I think he is asking if he can deduct the expense of Breaking your WORD. He obviously agreed to stay for a period of time and did not.

Had I broke the contract, your statement would've held. However, the contract was respected and paid out.

[godsrcrazy]

I think he is asking if he can deduct the expense of Breaking your WORD. He obviously agreed to stay for a period of time and did not.

Had I broke the contract, your statement would've held. However, the contract was respected and paid out.

Thats good to hear. Are you saying they broke the contract and you still had to pay the pro rate. If so that is fing BS. If you left and paid. Its good to see some one does stick to their word. I didn't stay like i said i would here you go later.

[wallypilot]

Thanks for re-posting that post of yours. I'll see if they'll fill out the T2200.

If you go the T2200 route you will only be able to claim the expense as an education costs which generates a non refundable tax credit of 17% of the amount claimed. Thus $5000 in bond costs looks like $850 tax credit which offsets other taxes you have paid.

If you can get your former employer to sign a T777 (and if they will sign at T2200 they probably will sign the T777) you can deduct the $5000 as an "employment expense" (basically something which the employer required you to pay for in order to earn income) at which point the $5000 comes off the top line of your net income (much like how an RRSP contribution is deductable).

Assuming you made more than $40,000 this is more advantageous since the implied value of the tax savings is greater than the 17% allowed under the T2200 route.

I instruct part time and deduct the cost of annual rides and recurrent training using the T777 route. Since I generate lots more money from my day job and am taxed at the highest marginal tax rate for Alberta (40%)...the difference is substantial.

Using $5000 training costs:
a) The T2200 route gets me $850 back
b) The T777 route gets me $2000.

I think you are thinking of the T2200A. That is the Tuition form. What we are talking about is the T2200 (Conditions of Employment) that needs to be completed and signed in order to claim employment expenses. You won't be able to get a T2200A from your employer, since they are not part of the PPSEC (Private Post Secondary Education Commission) and hence won't even issue you a T2200A anyways.

Don't be confused...there is only one way to do it. T2200 filled out and signed by your employer. Then, the T777 is part of your income tax return, not a form to be filled out by the employer, but by you as you calculate your taxes. The amount you paid towards your bond would go under "Other Expenses", I believe. Don't let what JAHinYYC said confuse you...if you need clarification, feel free to PM me. What he said is not entirely wrong, but it's not relevant if you understand the difference between a T2200 and a T2200A. Since he(or she?) works in a flight school, I can see why he might be confused as they probably issue a lot of T2200A forms to their students.

[Ogee]

I know its called a training bond, but in reality it is a agreement where the Company provides training and you pay the cost of that training up front. As part of the agreement, and in consideration for the value it receives in having a properly trained pilot over time, the company agrees to refund the bond at the end of an agreed period. I know there can be different tax treatments on this, I see some suggesting the education expense route, but the important thing is to keep it conceptually simple. As above. That makes it much easier to understand how you would account for such a transaction.

I'd take this approach.

You got trained, you got invoiced for that training, you paid for it. As part of the agreement, the company agreed to refund the cost of your training if you stayed for the specified time. At the beginning, you enter it in your T1 as a training cost. You have the invoice. You incurred that cost to earn income. Its a deduction.

If all or part of the bond gets refunded, you declare that in "other income" on your T1.

If you're working contract, you have to do the Professional Income statement and it goes as an expense in the year you pay it, and extraordinary income in the year you get it back.