Small Business Deductions: Apprenticeship Job Creation Tax Credit

Looking to hire new employees? You could catch a tax break while helping an apprentice hone their craft. The Canada Revenue Agency (CRA) offers small business owners the opportunity to earn the Apprenticeship Job Creation Tax Credit. This credit helps cover a portion of the salary you pay to eligible apprentices who work in certain trades.

The Math Behind the Apprenticeship Job Creation Tax Credit

In each tax year, you can claim 10% of each eligible apprentice’s salary, up to $2,000. For example, imagine you hire two apprentices. One makes $18,000, while the other makes $25,000. You can calculate the tax credit this way:

  • 10% of $18,000 = $1,800 as your tax credit for the first employee
  • 10% of $25,000 = $2,500 for the second employee, exceeding the $2,000 cap
  • $1,800 for the first employee + $2,000 for the second employee = $3,800 tax credit for hiring two eligible apprentices

When filing your income tax return, the AJCTC is classified as an investment tax credit (ITC) that’s entered on line 412 of Form T2SCH31. You also have the option to carry any unused credit back three years and forward 20 years in your tax returns. The deduction lowers the amount of money you may owe the CRA at tax time.

Eligibility for the Apprenticeship Job Creation Tax Credit

To be eligible for this tax credit, you must hire someone who is in the first two years of a registered apprenticeship contract. The apprentice must register this contract with federal, provincial, or territorial governments. The contract shows that the apprentice you hire works under an approved program designed to certify or license the apprentice in their chosen trade.

To qualify as an eligible apprentice, your employee must be designated for certification under one of Canada’s Red Seal Trades. This list spans more than 50 different trades, ranging from carpentry and plumbing to hairstyling and baking. Working for your business gives apprentices opportunities to become experts in their trades as they move towards licencing and certification. When you hire an apprentice, you also provide a good job to a hard worker.

QuickBooks lets you assess payroll for your employees and track expenses that go towards business deductions on your returns. QuickBooks Online can help you maximize your tax deductions. Keep more of what you earn today.

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