Many advisors with continuing education requirements on their minds this time of year may want to familiarize themselves with two relatively new tax credits that could help reduce the cost of fees.
Over the past two years, a federal tax credit and an Ontario training tax credit have become available for many of the professional development courses that the roughly 30,000 investment advisors licensed under the Investment Industry Regulatory Organization of Canada (IIROC) must complete before the end of the year.
Although the Canada Training Credit (CTC) and Ontario Jobs Training Tax Credit, which is available to advisors in Ontario, could apply to IIROC registrants coming to the end of their two-year cycle to meet their CE requirements, these tax provisions could also apply to the 77,000 or so advisors registered with the Mutual Fund Dealers Association of Canada (MFDA), who must complete 30 hours of CE every two years starting Dec. 1.
“To the extent advisors themselves are paying for training, and by in large it is the vast majority of them, the tax credits could apply,” says John Waldron, founder of Learnedly Canada Inc., which provides online training for the financial services industry.
The CTC, also known as the Canada Training Benefit, was announced in the 2019 federal budget as an annual $250 credit that can be applied to 50 per cent of the cost of education courses related to an individual’s job development, so long as these are offered by an accredited Canadian provider.
“It’s not a huge credit now, but it’s something,” says Evelyn Jacks, founder and president of the Knowledge Bureau Inc. in Winnipeg, which provides CE for advisors.
The credit became available in 2020 and gives individuals a lifetime maximum of $5,000 in tax savings.
Ms. Jacks notes an individual “needs 20 years to reach the maximum amount,” but if unused in any given year, a notional credit of $250 accumulates upon filing a tax return. In turn, those built-up credits can be used in later years with the accumulated balance reduced accordingly.
For example, IIROC-licensed advisors who did not claim the credit for 2020 would have larger CTC room to claim for 2021, she says. Combined, advisors could receive $500 in tax savings if they have $1,000 in eligible CE fee costs in 2021.
Limitations of the tax credits
Still, some eligibility limitations apply to the CTC, says Breanne Stephenson, media relations co-ordinator for Canada Revenue Agency, in a recent e-mail.
She says advisors can claim the credit “for a taxation year if they satisfy” all the following conditions:
- They were at least 26 years old and under 66 years old at the end of the year;
- They are Canadian residents throughout the year;
- They have a total working income – including maternity and parental benefits – of $10,100 or more in the taxation year;
- They have individual net income for 2020 that does not exceed $150,473.
“All of that also applies to the Ontario Jobs Training Tax Credit. However, that credit is temporary, so it’s a one-and-done for 2021,” says Mr. Waldron.
He adds the Ontario credit was approved with “little fanfare” this year, so many advisors may not even be aware of its existence.
But it’s worth becoming familiar with quickly, given the Ontario benefit provides up to $2,000 in tax credits on 50 per cent of eligible expenses, particularly for designation holders and IIROC-licensed advisors who likely have taken professional development courses this past year.
Mr. Waldron says MFDA-licensed advisors could still take advantage of the training credits for this year if they complete accredited courses after Dec. 1 and before Jan. 1, 2022.
The Ontario and federal credits are also “complementary – meaning advisors can apply both against expenses” resulting in a “fairly sizable tax credit” and savings on the cost of tuition and fees, he says. For example, “someone could spend $4,000 on training this year, and get $2,000 back from the Ontario government and get $250 back from the federal government.”
Mr. Waldron says he is unaware of similar credits for advisors in other provinces, but “it’d be nice” if other provinces followed suit.
Other credits that could apply
In addition, advisors with costs exceeding the federal, or the combination of it and the Ontario credit, may be able to use other tax provisions for additional savings.
For example, Mr. Waldron says self-employed advisors who are unincorporated could claim CE costs exceeding the training credits as business expenses.
Ms. Jacks says another option is the tuition tax credit. Tuition costs exceeding $100 in a year are eligible for the amount, a 15 per cent credit; provincial tuition credits may also apply.
However, self-employed advisors can often choose between the “tuition credit and claiming costs as a deductible business expense, but not both,” she says.
Claiming these additional credits and deductions “can be confusing depending on your employment status,” Ms. Jacks says, and some advisors may want to seek tax advice for help.
Despite the nuances, the Ontario Jobs Training Tax Credit is certain to provide tax savings for many advisors in Ontario this year, while the federal CTC will provide relief for thousands of advisors nationwide, Mr. Waldron says.
“They’re a really a good opportunity to ease the expense of continuing education for a lot of advisors,” he says.