Have you recently invested in qualified property, Scientific Research and Experimental Development, Mining Exploration, Apprenticeship jobs, or Childcare spaces? If so, you may be able to lower your payable amount on your Canadian tax form using an Investment Tax Credit. Commonly referred to as an ITC, the investment tax credit is available to those who qualify by filling out the T2038 IND form.
Here’s everything you need to know about the T2038 IND Form in Canada:
Who qualifies for an Investment Tax Credit?
You can file for an Investment Tax Credit in Canada if:
- You have acquired a qualified or certified property where “qualified or certified” properties refer to new machinery, buildings, or equipment used in specified Canadian regions for the purpose of logging, farming, manufacturing, fishing, or processing.
- You have contributed to SR&ED (Scientific Research and Experimental Development) and have done work that qualifies for SR&ED tax credits.
- Have been allocated renounced Canadian Exploration Expenses
- Have hired and paid wages to eligible apprentices
- Or have developed a space for child care in a licensed facility to provide care for your employee’s children.
Note: You can file for an Investment Tax Credit for the current tax year, or you can carry forward an Investment Tax Credit from a previous year.
How is the Investment Tax Credit calculated?
Investment Tax Credits are calculated based on the percentage of the investment cost. This can include any property that has been bought and any expenses that have been incurred.
The Tax Credit calculations also consider any reimbursements, assistance, or inducements related to your expenditure. These will be deducted from your overall cost.
Getting into the Specifics
Scientific Research and Development: If you are applying for an Investment Tax Credit based on your investment in Scientific Research and Development, it’s important to know that you don’t have to be conducting the research yourself directly.
Tax incentives may also be offered to those paying a third party to research on their behalf. With that being said, if this is the case, only 80% of the expenditures will qualify for tax incentives.
Exploration Credit: This credit is designed to help assist mining companies that are just starting up. If you own any shares in an exploration company, you can qualify for up to 15% of the expenses incurred by the company.
Apprenticeship Credit: This credit is available to anyone who has hired and paid eligible apprentices. “Eligible apprentices” include those working in any traditional or manual trade.
The credit can reach up to $2000 per year or 10% of the salary paid to an apprentice. To qualify for the Tax Incentive, the position must lead to certification for the Apprentice.
Child Care Credit: If you have created a space for children in a child care setting to accommodate employees or a mix of employees and the community, you can file for a Tax Credit of up to 25% of your costs. The maximum credit for this specific situation is $10 000.
How do I file for an Investment Tax Credit?
To file for your ITC, you must fill out a T2038 IND form. You must also fill out the amount on your Tax Return on Line 41200.