Apprenticeship Tax Fun


June 4th, 2012

This article was written for the Business First publication……I’m posting it again here in case anyone missed it 🙂

 

What do bakers, chefs, electricians and hair stylists all have in common?  Well, for one thing, an apprentice employee working in any one of these trades may be eligible for grants of up to $4,000.  Each of these trades, plus many more of course, can be designated under the Red Seal Program.

There’s more good news for the employer who is hiring an apprentice in the Red Seal Program – the employer may also qualify for tax savings of up to $4,000.  This is possible through the Apprenticeship Job Creation Tax Credit.

So between the grants available to the apprenticed employee, and the grants available to the employer, the government is willing to dish out up to $8,000.  This sounds like a good deal, and it is. Let’s look at this further through a “real life” example.

Raymond, a young 19 year old, is a resident of Stewiacke, Nova Scotia.  He is enrolled in courses to become an electrician.  He has successfully completed his first year of school and has obtained employment as an apprenticed electrician, working for Coastal Electrical, a local company. Upon finishing his first year of apprenticeship, he applied for the Apprenticeship Incentive Grant and received $1,000.

Raymond is eligible to receive another $1,000 grant after he completes his second year of apprenticeship.  He is also looking forward to completing his apprenticeship program, after which he can apply for the Apprenticeship Completion Grant and receive a final $2,000.

Coastal Electrical, the local electrical company that hired Raymond, is also eligible for some decent tax savings.  Under the Apprenticeship Job Creation Tax Credit, a business that hires an eligible apprentice can receive a tax credit of 10% of the wages paid to the apprentice, up to a maximum of $2,000 per year.  An eligible apprentice is one who is in his or her first two years of apprenticeship contract.

Coastal Electrical hired Raymond in 2012 and paid him a salary of $30,000.  When Coastal Electrical files its tax return for 2012, they will be eligible to reduce their federal taxes payable by a total of $2,000.  If Raymond remains employed by them for the full two years of his apprenticeship contract, they will be able to claim this tax credit again in the second year.

The Apprenticeship Incentive and Completion Grants, and the Apprenticeship Job Creation Tax Credit, have been around for a few years and are fairly well known by now.  Perhaps what is less well known is how many different types of trades can qualify for these grants / tax credits.  A full list of eligible trades can be found at www.red-seal.ca and includes the well known Red Seal trades (electrician, mechanic, plumber) but also some less well known trades (baker, cook, hair stylist, partsperson).

For more information on the Apprenticeship Incentive and Completion Grants, visit www.servicecanada.gc.ca.  For more information on the Apprenticeship Job Creation Tax Credit, visit www.cra.gc.ca

Next issue, we’ll take a look at how students like Raymond can qualify for up to $15,000 more in tax savings!   Please note that the above “real life” example uses fictional names.  Any resemblance to any actual person or business is strictly coincidence. 


 

Filed under: Business tax, Personal Tax by David Boese No Comments »