There are a number of tax deductions and benefits that taxpayers can claim to help reduce their taxable income and overall tax owing. But with so many credits and deductions to consider, it is no surprise that some, more than others, are often overlooked come tax filing season.
One of the most commonly overlooked claims is for annual union, professional or similar dues. Like many deductions claimed by taxpayers, expenses related to dues can be deducted dollar for dollar from your annual income, without limit, so long as your dues meet the eligibility requirements. This means that you do not have to pay any income tax on the amount equal to your dues.
To claim your dues, they must be necessary for you to maintain professional standing. In the case of voluntary associations, dues are not deductible. This is because by law you are not required to participate in these associations to maintain your credentials.
Eligible dues include:
- Annual union dues for membership in a trade union or association of public servants.
- Professional dues which must be incurred under provincial and territorial laws.
- Trade licensing necessary to practice a profession.
- Professional liability insurance premiums.
- Malpractice liability insurance premiums.
- Professional dues to maintain a professional status.
- Dues required under provincial and territorial laws for parity or advisory committees.
It is also important to note that not all charges and fees levied on your annual membership fees are deductible. Specifically, membership dues cannot include initiation fees, licenses, special assessment or any other charges not included in the organization’s operating costs, such as pension plans.
There must also be a connection between your employment and the professional association. If you have recently graduated and are working as a cashier while you look for a new position related to your accreditation, you are not entitled to deduct membership fees.
Similarly, if you are a lawyer working as a CEO for a car lot, you would be unable to claim your fees. If however, you are a lawyer working for a law firm or are an civil engineer working for a building design and construction company, you can claim your fees, even if your employer does not require you to maintain them.
In addition, if your dues are paid by your employer and not included on your annual T4 as a taxable benefit, you may not claim a deduction for your membership fees as it has not come out of your income.
If the membership fees are listed as a taxable deduction on your T4, however, they may be claimed, as the cost associated with your fees has been included in the calculation of your income for the year.
For more information on claiming your professional or union dues, or for assistance in preparing your tax strategy in consideration of these fees, please contact us today.
