Deduction for Tradesperson’s Tools Expense

For 2023 and subsequent taxation years, the Budget proposes to raise the maximum employment deduction for tradesperson’s tools from $500 to $1,000.

1. What are the current rules?

A tradesperson can generally claim a deduction of up to $500 of the amount by which the total cost of eligible new tools acquired in a taxation year as a condition of employment exceeds the amount of the Canada Employment Credit ($1,368 in 2023).

The total cost of eligible new tools cannot exceed the total of the employment income earned as a tradesperson and any apprenticeship grants received to acquire the tools, which are required to be included in income.

2. What is changing?

The proposed changes would raise the maximum employment deduction for tradesperson’s tools from $500 to $1,000.

As a consequence of this change, extraordinary tool costs that are eligible to be claimed under the apprentice mechanics' tools deduction would be those that exceed the greater of:

• the combined amount of the increased deduction for tradesperson’s tool expenses ($1,000) and the amount of the Canada Employment Credit ($1,368 in 2023) or
• 5% of the taxpayer’s income earned as an apprentice mechanic (including apprenticeship grants less any claim for the tradesperson’s deduction for tools and the amount of any apprenticeship grant overpayments repaid during the taxation year)

3. Where can I get more information on the current deduction for tradesperson’s tools?

For more information, go to Deduction for tools (tradespersons) - Canada.ca.

4. Where can I get more information on the change?

Check online at Canada.ca regularly for updated forms, policies, guidelines, questions and answers, and guidance.

In the meantime, please consult Finance Canada's Budget 2023 documents for details.