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Deductions for Union and Professional dues

11 Jul 2005 12:38

Deductions are allowed for Deductions for Union and Professional dues when a person is working.

What happens after retirement - Can these deductions still be made?

Membership may no longer be required to allow person to work, but may be needed for other reasons, such as union pension, favourable insurance rate or just to keep involved with a profession in either volunteer or social way.

11 Jul 2005 13:57

I believe you're out of luck after retirement. The reason union and professional dues are deductible is that they are necessary to enable you to earn the income you report. Hence they are a cost of doing business. If you're no longer "in business", you can't deduct the costs any more.

George

11 Jul 2005 14:44

I'm retired and have been paying professional dues at a reduced retiree rate for the past few years. The professional oganization sends me an income tax receipt each year, which I enter as a deduction. I've never had a problem with CRA.

11 Jul 2005 17:39

Does or can the CRA distinguish between retired and non-retired people? If so, how about semi-retired people, and what criteria could they use to make this determination?

A further, related question to the original thread topic:

If I am running a small business and am not taking any salary from it but keeping retained profits for dividend payments in future years, can I deduct my professional dues from my personal income (mostly investment income) or am I obliged to run these costs through the business, where the tax deduction will be less beneficial?

11 Jul 2005 19:42

Gus wrote:Does or can the CRA distinguish between retired and non-retired people? If so, how about semi-retired people, and what criteria could they use to make this determination?


CRA has no idea whatsoever of your retirement status. You could very well just be unemployed, or taking a year or two off.

If I am running a small business and am not taking any salary from it but keeping retained profits for dividend payments in future years, can I deduct my professional dues from my personal income (mostly investment income) or am I obliged to run these costs through the business, where the tax deduction will be less beneficial?


The relevant section of the ITA is paragraph 8(1)(i). I don't see anything there that indicates you absolutely have to be employed.

Take the deduction personally. Nobody will say anything. The worst thing that can happen is that it will be dis-allowed. And that's a real stretch.

11 Jul 2005 20:20

Jo Anne wrote:CRA has no idea whatsoever of your retirement status. You could very well just be unemployed, or taking a year or two off.


Thanks, that's what I would have guessed, but:

George wrote:I believe you're out of luck after retirement....if you're no longer "in business", you can't deduct the costs any more


As usual, I'm confused. Are there any tax experts out there?

11 Jul 2005 23:35

My feeling is that if we retain our union/professional membership, we are then ABLE to work. If not much work comes our way, at lest we tried ;)

CRA maybe would rule against the deductionif pressed, but for now, I think I will just keep claiming the fees until told otherwise!

12 Jul 2005 00:00

Who knows when a consulting opportunity will show up? :wink:

12 Jul 2005 12:21

Gus wrote:If I am running a small business and am not taking any salary from it but keeping retained profits for dividend payments in future years, can I deduct my professional dues from my personal income (mostly investment income) or am I obliged to run these costs through the business, where the tax deduction will be less beneficial?

If you're an engineer, you can't do engineering work personally or through a corporation without having paid your professional dues. As they are legally required in order to generate an income, they are deductible on your personal return.

If you want to CYA six ways from Sunday, have the corporation's board of directors (you, I assume :wink:) approve a policy that all professionals employed by the company pay professional dues from their own pockets.

12 Jul 2005 15:16

[Restored from backup 2006-07-18]

The deduction for union and professional dues is deductible on the logic that it is required to produce income. Retired union members often receive pension and benefits that produce T-Slip income. Sometimes these dues are deducted off the pension. It is a requirement of receiving this income.

12 Jul 2005 16:09

From IT-211R Membership Dues - Associations and Societies:

membership fees in professional associations, trade or commercial associations, learned societies, service clubs and cultural organizations will be allowable deductions from income if they can reasonably be shown to relate to the earning of income from the business or property.


As dagan and I said upthread, you can only deduct professional fees and union dues if they are necessary to earn income from a business or property.

Note the latter words. A pension is not property for purposes of the ITA, so just because you have to pay union dues to collect it, does not mean that you are entitled to deduct the dues.

As for keeping open the possibility of earning future income, you must have plans that can "reasonably show" a relationship between the dues or fees and future income of some kind. Pious wishes are not enough.

By all means, if you have a corporation, have the corporation pay the fees or dues for you. But to get a deduction, the corporation must have active business income to deduct the fees or dues against.

Finally, of course you can always try to claim a deduction. Often, CRA will not notice, especially if it is a small one. Even if you are challenged, usually the most you will be liable for is the missing tax plus interest. However, if CRA thinks you are deliberately trying to evade tax, you may have a problem.

I would strongly advise against such courses of action, as against all other forms of cheating on your income tax return.

George

IANALY

12 Jul 2005 20:35

ghariton wrote:From IT-211R Membership Dues - Associations and Societies:

membership fees in professional associations, trade or commercial associations, learned societies, service clubs and cultural organizations will be allowable deductions from income if they can reasonably be shown to relate to the earning of income from the business or property.


As dagan and I said upthread, you can only deduct professional fees and union dues if they are necessary to earn income from a business or property.

IANALY


Employed professionals or union members are able to deduct fees right on their personal return.

Not sure how "income from a business or property" would apply in this case since an employed person is not operating a business or property.

12 Jul 2005 21:08

I don't know if this will apply to the original poster, but often union/professional dues will be reduced to $0 if you report your status as "retired."

This is what happened to my CGA dues when I advised them I was retired.

Oh, and I don't have to be 100% retired, just mostly retired. I asked. They told me they have no problems with retired members earning small amounts of money from occasional work. I mark assignments for them, and earn ~5K/year doing that.

12 Jul 2005 21:22

Jo Anne wrote:I don't know if this will apply to the original poster, but often union/professional dues will be reduced to $0 if you report your status as "retired."

Engineers in Ontario
PEO recognizes the following situations in which a reduced or no annual licence fee may apply:
A) Retired Member;...

The reduced annual fee is $40, plus GST, for 2004. The annual fee is set at 25 per cent of the P.Eng. licence fee, plus GST, as of January 1, 2005. The 2005 Fee is $53.50 including GST.

A. Retired Member
Is eligible for the reduced fee if the member:
• is not practising engineering
• has no income from engineering employment; and
• whose age plus years of practice as an engineer equals or exceeds 90...

12 Jul 2005 22:52

The IT I linked to above covers professional fees paid while conducting a business, i.e. self-employed. If you are an employee, the relevant IT is IT158R2 Employees' professional membership dues.

An employee may deduct annual professional membership dues in computing the income or loss from an office or employment to the extent that they may reasonably be regarded as applicable to that source of income and provided that

(a) they are annual dues (in contrast with entrance fees) necessary to maintain professional status,

(b) the amount claimed is paid in the taxation year and the employee is not reimbursed or entitled to be reimbursed, and

(c) the professional status is recognized by a Canadian, provincial, or foreign statute.


As far as deducting professional fees or union dues against pension income, the IT goes on to state, in part:

an employee may not deduct annual professional membership dues (or union dues under subparagraph 8(1)(i)(iv) or dues to a parity or advisory committee or similar body under subparagraph 8(1)(i)(vi)) to the extent that they are, in effect, levied

(a) for or under a superannuation fund or plan,

(b) for or under a fund or plan for annuities, insurance (other than professional or malpractice liability insurance that is necessary to maintain a professional status recognized by statute) or similar benefits


George

13 Jul 2005 12:07

[Restored from backup 2006-07-18]

an employee may not deduct annual professional membership dues (or union dues under subparagraph 8(1)(i)(iv) or dues to a parity or advisory committee or similar body under subparagraph 8(1)(i)(vi)) to the extent that they are, in effect, levied

(a) for or under a superannuation fund or plan,

(b) for or under a fund or plan for annuities, insurance (other than professional or malpractice liability insurance that is necessary to maintain a professional status recognized by statute) or similar benefits


Maintaining member status in retirement does not make the dues paid "for or under a superannuation fund or plan". As long as the union dues continue to be 'directly related to the ordinary operating expenses of the association to which they are paid', and meet the other requirements quoted, they are deductible.
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