Tool Tax Credit

The Saskatchewan Building and Construction Trades Council would like to extend our thanks the many MLA’s who supported the implementation of the Saskatchewan Tool Tax Credit. We would especially like to thank Mr. Ron Harper, MLA for Regina Northeast, for taking the initiative on the tool tax credit. We would like to commend Mr. Harper for all the hard work he put it to gaining this tax credit for construction workers across the Province.

Link for 2006 tool tax credit tax form.

The new tax credit provision has two components:

  • a One-Time Trade Entry Credit
  • and an Annual Maintenance Credit

The Entry Credit recognizes the high cost of initial purchases of work related tools required as a condition of employment. It is available only in the first year in which the tradesperson commences employment.

The Maintenance Credit recognizes the ongoing cost of maintaining or replacing work-related tools.

The maximum amount for each component is dependent upon the trade group in which the individual is employed.

The following is a general description of the tool tax credit from the 2006-2007 Provincial Budget.

EMPLOYEES’ TOOL TAX CREDIT

GENERAL

Skilled tradespeople are able to deduct the cost of their tools for income tax purposes if they are self-employed. On the other hand, employees generally do not receive tax recognition for the cost of tools that they must supply themselves as a condition of their employment. This can be a significant cost impediment for workers employed in a skilled trade.

Beginning in 2006, a provincial income tax credit is introduced to recognize the costs associated with purchasing, replacing and upgrading eligible tools by qualifying employees as a condition of their employment. The tax credit consists of two components: a one-time trade entry amount and an annual maintenance amount. The maximum amount for each component is dependent upon the trade group that the individual is employed in. The tool tax credit is calculated as 11 per cent of the specified credit amounts for each of the trade groups.

TRADE GROUPS

The four basic trade groupings, as well as the maximum amounts that may be claimed for the one-time trade entry tax credit and the annual maintenance tax credit, are shown in the table below.

ONE-TIME TRADE ENTRY AMOUNT

The one-time trade entry tax credit amount is intended to recognize the high initial cost of tools that are required to be purchased by employees to enter their trade. To be eligible for the one-time trade entry credit, the following conditions apply:

  • the employee must be performing a designated task in one of the four trade group categories;
  • the employment must represent the employee’s primary source of income;
  • the tools must be purchased as a condition of employment; and,
  • the actual cost of the tools purchased in the year in which the tradesperson commences employment must exceed the gross credit amount for that trade group.

The one-time trade entry credit may only be claimed in the year in which the individual commences employment in a particular trade. The credit may only be earned once in a lifetime. Individuals who are not able to use the entire trade entry amount in their first year of employment can carry forward the unused portion for up to an additional two taxation years.