Deductibility of Association and Membership Dues

January 2005

To assist our clients in determining whether their payment of dues are deductible, we have prepared this document setting out excerpts from Canada Revenue Agency interpretations. The following statements are quotes from IT-158R2 “Employees’ professional membership dues” published July 14, 1989.

1. 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
   1. they are annual dues (in contrast with entrance fees) necessary to maintain professional status,
   2. the amount claimed is paid in the taxation year and the employee is not reimbursed or entitled to be reimbursed, and
   3. the professional status is recognized by a Canadian, provincial, or foreign statute.
2. In determining whether a payment is applicable to an office or employment for the purposes of 1 above, such a payment need not be essential for an employee to hold a position or job. However, there must be a reasonable degree of relationship between it and the position or job. For example, a chemical engineer who is employed by a company to sell chemical products or who is the president of a company that processes chemicals satisfies this requirement in respect of engineering dues. On the other hand, an architect, who is working full-time as president of a clothing manufacturing business and who is not a practicing architect does not satisfy the requirement and, accordingly, is not entitled to deduct dues paid to maintain professional
   status as an architect.
3. Since it is the employee’s professional status (not the organization’s) that must be recognized by statute, dues are only deductible where membership in an organization is necessary for the employee to retain professional status. If membership in a given association does not affect professional status (e.g., the Canadian Medical Association for physicians) dues to it are not deductible even if they entitle the employee to a designation of letters after his or her name. (However, see 4 below for an exception to this rule [where employee works in a province that has no legislation governing that profession]) If, on the other hand, membership is necessary to maintain professional status (e.g., the provincial College of Physicians & Surgeons for the physician) the dues to it are deductible. Within these limitations, an employee may claim dues paid to more than one professional organization (e.g., a physician who belongs to the College of Physicians and Surgeons in two provinces). Where membership in a provincial organization is necessary to maintain an employee’s professional status and the provincial organization requires payment of annual dues that, in part, are passed on to a national association, the entire amount of the annual dues qualifies as being necessary to maintain professional status even though direct membership in the national association by an employee would not affect the employee’s professional status.
4. For the purposes of 1(c) above, it is not necessary that the employee’s professional status be recognized by statute in the jurisdiction of employment. For example, where an employee, who resides and works in Alberta, belongs to an association in Australia where the employee’s professional status is recognized by statute, the employee would be entitled to deduct dues paid to the association provided the other requirements in 1 above are met.Actual wording of the Income Tax Act states in Paragraph 8(1)(i)
   

   “In computing a taxpayer’s income for a taxation year from an office or employment, there may be deducted such of the following amounts as are wholly applicable to that source or such part of the following amounts as may reasonably be regarded as applicable thereto:…

   amounts paid by the taxpayer in the year as

   1. annual professional membership dues the payment of which was necessary to maintain a professional status recognized by statute,…”

This publication has been produced to inform readers of current issues. It is neither a definitive analysis of the law nor a substitute for professional advice. Seek professional advice before acting on information in this article. Information may change as a result of legislation or regulations issued after this publication was printed. © Blair Corkum 2005

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Blair Corkum, CPA, CA, R.F.P., CFP, CFDS, CLU, CHS holds his Chartered Professional Accountant, Chartered Accountant, Registered Financial Planner, Chartered Financial Divorce Specialist as well as several other financial planning related designations. Blair offers hourly based fee-only personal financial planning, holds no investment or insurance licenses, and receives no commissions or referral fees. This publication should not be construed as legal or investment advice. It is neither a definitive analysis of the law nor a substitute for professional advice which you should obtain before acting on information in this article. Information may change as a result of legislation or regulations issued after this article was written.©Blair Corkum