September not only marks the return to school for students, but also has teachers heading back to the classrooms after a two-month hiatus. But this fall, eligible teachers may have a bit more cash in their pockets courtesy of the recently introduced “Teacher and Early Childhood Educator School Supply Tax Credit.”
Announced formally in the 2016 budget, the new credit is meant to compensate teachers and early childhood educators who often incur personal, unreimbursed costs to purchase teaching supplies to enhance the students’ classroom learning environment.
The new tax break, for 2016 and future tax years, allows eligible educators to claim a 15-per-cent refundable tax credit for up to $1,000 in qualifying school supply expenses each year. For the cost of supplies to qualify, employers will be required to certify that the supplies were purchased “for the purpose of teaching or otherwise enhancing learning in a classroom or learning environment.” Educators should retain their receipts in case they need to be verified.
Teachers will qualify as eligible educators if they hold a valid teacher’s certificate for the province or territory in which they are employed. Similarly, early childhood educators will qualify as eligible educators if they hold a certificate or diploma in early childhood education that is recognized by the province or territory in which they are employed.
The costs of supplies will be eligible for the credit if they were purchased for use in a school or in a regulated child care facility. This week, the CRA provided some examples of eligible supplies, which can include: construction paper, flashcards, items for science experiments, art supplies, various writing materials, games and puzzles, books for the classroom and educational support software.
Of course, for the supplies to be eligible for this credit, the costs must not be reimbursable and not subject to an allowance or other form of assistance (unless the reimbursement or allowance is included in the teacher’s income.)
This new credit likely came about as a result of years of teachers’ frustrations with their inability to deduct employment expenses. Under the Income Tax Act, an employee can only deduct “the cost of supplies that were consumed directly in the performance of the duties of … employment and that the … employee was required by the contract of employment to supply and pay for.”
In other words, to deduct employment expenses, such as non-reimbursed supplies, you need your employer’s acknowledgement that you were indeed required to pay those expenses. This requirement must be certified by your employer on Form T2200.
In 2010, the CRA was asked by one of Canada’s education boards whether it should be completing the T2200 forms for teachers who spent their own personal money on teaching supplies, but were not reimbursed. The issue came down to whether the requirement to pay for supplies is explicitly included in a contract of employment or could be implied.
While each case is different, the CRA pointed to factors used in previous tax cases, such as whether or not the failure to purchase supplies could result in termination of employment, a poor performance review or other disciplinary action.
The CRA concluded that it expects employers to complete a T2200 “in situations where the employees have reasonable grounds to make the related claims.” However, it would not expect an employer to complete the form if there was “no express or implied requirement” for the employee to supply and pay for teaching supplies.