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Friday, December 9, 2016

How to declare arts grant expenses on Canadian taxes

Here are some of the rules (section S1-F2-C3)

Awards for the production of a literary, dramatic, musical or artistic work

3.98 Paragraph 56(3)(b) permits a taxpayer to exclude from income an amount relating to a scholarship, fellowship, bursary or prize that is to be used by the taxpayer in the production of a literary, dramatic, musical or artistic work (this is commonly referred to as the art production grant exemption). In order for the art production grant exemption to apply, the amount of the grant must be used in computing the taxpayer’s income under subparagraph 56(1)(n)(i).
3.99 The art production grant exemption is calculated as the total amount of reasonable expenses (see ¶3.100) incurred in the year to fulfill the conditions of receiving each art production grant, up to, but not exceeding, the total amount of each grant that is used in computing the taxpayer’s income under subparagraph 56(1)(n)(i). As discussed in ¶3.77 in relation to research expenses, expenses incurred in the immediately preceding or the immediately following year may also qualify.
3.100 The amount of reasonable expenses cannot include:
  • personal or living expenses of the taxpayer (other than expenses of travel, meals and lodging incurred by the taxpayer in the course of fulfilling the conditions of each art production grant and while absent from the taxpayer's usual place of residence for the period to which the art production grant relates);
  • expenses for which the taxpayer is entitled to be reimbursed;
  • expenses that are otherwise deductible in computing the taxpayer's income; or
  • travelling expenses relating to his or her spouse, common–law partner, children or other third parties.

What you do, according the tax person I talked to on the phone, is you take the amount of your grant, deduct $500 from it (for some reason you get to not declare that portion), then deduct all your expenses from the year in question ("reasonable expenses not exceeding the amount of the grant), then put that final number into LINE 130 of the tax form. You only put the net income. They don't ask you for the break down, although you need to keep the receipts because they could ask for them later. 

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