Many individuals working in the construction industry seek the red seal qualification as a means to prove their high level of skill and experience, ultimately allowing them to be paid a higher wage. The BC province actively encourages individuals to seek this higher level of skill by providing a range of tax credits and other financial incentives. If you have recently completed a certain level of competency as part of the red seal program you could be entitled to receive a tax credit on your next tax return.
How to claim the credit – Levels of completion – Impact on tax return
Depending on the course you are completing, there are differing levels of completion. A typical red seal course will see a tax payer complete 4 levels of the red seal program. Depending on the course being completed you can claim BC provincial tax credits upon the completion of levels 3 and 4.
It is very important to understand your course, and the eligible tax credits that can be claimed for each level of completion, as the tax credits available are very generous. For example, a plumber is eligible to claim level 3 tax credits upon completion of level 3 of the program, and they are also eligible to claim level 4 tax credits once they have graduated from the red seal program. The level 3 tax credit is $2,000 and the level 4 tax credit is $2,500. This means a tax payer who passes level 3 and also graduates in the same year is entitled to a total tax credit of $4,500, which will directly increase their tax refund amount by $4,500. It certainly pays to be aware of the potential tax credits available.
What programs are eligible for the credit
It is important to note that not all programs that qualify for the red seal certification are eligible for the BC provincial tax credit. For example, a tower crane operator completing the program after 2016 is able to receive the red seal certification, however there are zero available tax credits that can be claimed from completing the program.
When commencing a program, it is important to understand the tax credits you may be eligible to claim. Detailed information regarding the programs and their respective eligible tax credits can be found using the following link to the BC government website:
Apprentice incentive grant
Most red seal programs will require you to pass levels one and two, upon completion of these levels there are no tax credits that can be claimed as part of your provincial tax credits; however you may be eligible to apply for the apprentice incentive grant. The apprentice incentive grant is a federally issued grant to individuals who are completing levels one and/or two for eligible red seal programs. It pays to be informed of the available grants that can be received. Grant payments that are received are considered to be taxable income, and as such you will be issued with a tax slip at year end highlighting the grant income received. It is important to ensure that all income information is declared on your tax return when filing after year end.
Audits by CRA
Red seal tax credit claims are an ever-increasing area for audits by CRA. Due to the complex nature of the tax credit claims and a lot of confusion over which programs qualify, and the various levels that can be completed for each program it results in a lot of errors when tax returns are submitted to CRA. The CRA will request a certificate of completion to identify the course which has been completed, and they will remove tax credits which have been incorrectly claimed.
Questions/Assistance with tax filing
If you have questions about the tax credits that can be claimed from completing various levels of the red seal program, please do not hesitate to contact the jackstaxback team via email team@jackstaxback.com . We will be more than happy to field any questions or concerns you may have, as well as providing tax filing services which include the red seal tax credit claim. As of today (January 2023) our Vancouver office is not open for walk in appointments. If you wish to contact us, please forward your queries to our email address. Our tax filing services are operating as usual over email.