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Teacher and Early Childhood Educator School Supply Tax Credit

Tax credits for educators

Educators
In the 2016 Budget that was published by the Liberal government, a new tax credit was introduced for teachers and early childhood educators. This new tax credit is based on an amount up to $1,000 in expenditures made by an eligible educator employee for eligible supplies. For all eligible teachers and early childhood educators this is an opportunity to get an additional tax credit back for any eligible supplies that are purchased personally. The items that will be eligible for this credit will items that are used for facilitating learning or teaching and are directly consumed in a school or a regulated child care. Examples of eligible items are:
• Construction paper for activities, flashcards
• Items for science experiments, such as seeds, potting soil, vinegar
• Art supplies such as paper, glue and paint,
• Games & puzzles
• Books for the classroom
• Containers such as plastic boxes or bankers boxes
• Educational support software
• Posters with instructions, such as punctuation rules or chemistry formulas

Examples of items that would not qualify because they are being used over a long period of time would be:
• Computers & tablets
• Rugs
• Used items from home. The items must be purchased in the same year that it is claimed.

These supplies need to be purchased by the educator and will not be reimbursed. This will apply to the 2016 year, so we suggest that all educators start keeping your receipts for personal purchases made for the classroom or for the child care. In addition, at the end of the year these receipts should be submitted to their employer for verification.

Employers of Teachers and Childhood Educators
This brings us to our next point, as this new tax credit places a new responsibility on all organizations that have eligible teachers and early childhood educators as employees. It is your responsibility as an organization to review the receipts of the supplies purchased, and issue a letter to the employee stating the following:
1. The teaching supplies are eligible supplies as defined above
2. Indicate the amount paid by the educator for the supplies
3. That the employee is an eligible teacher or early childhood educator
4. That the employee was not reimbursed from the school, parents, students or fundraising activities for the expense.

If an eligible employee does not have this formal letter from their employer, the tax credit will be disallowed on the educator’s tax returns.

These new rules will apply to all elementary, secondary schools and regulated child care facilities. The above requirements could result in a lot of additional paperwork, extra responsibility, and additional liability from the Canada Revenue Agency for the employer to issue these letters accurately. As such, we suggest that these new options be communicated to all eligible employees with clear definitions of eligible supplies. In addition, employers should implement a process to ensure that all receipts for this credit are submitted at one time with a request for the formal letter from the organization. To keep things as simple as possible, it might be beneficial to have a standardized form for the educators to submit with their receipts.

If you have specific questions in relation to how this would apply to your organization, please contact us directly.

Resources:
http://www.cra-arc.gc.ca/gncy/bdgt/2016/qa03-eng.html
https://www.liberal.ca/realchange/investing-in-our-children-and-educators/

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