With tax season fast approaching, you’re likely wondering about the tax treatment for expenditures related to obtaining or maintaining your CFA charter. What, exactly, are the tax rules around expensing CFA membership dues and CFA examination fees?

Let’s look at this question from two angles: first, the situation where you’re an employee and pay the fees yourself, with no reimbursement from your employer; second, where you’re self-employed and/or you carry on a business.

If you’re an employee…

As a general rule, annual professional membership dues are deductible as long as they’re required to maintain a professional status recognized by a statute. This statute can be Canadian, provincial, or foreign. For instance, membership dues paid by professional accountants or lawyers would be deductible, since these professions are recognized by statutes in Canada.

However, for a professional status to be “recognized by a statute,” it doesn’t need to be regulated by the statute—the statute simply needs to acknowledge that status. Furthermore, it’s not necessary for the professional status to be recognized by the statute in the jurisdiction of employment.

What does this mean for your CFA membership dues? It means that the dues should be deductible if your professional status is recognized by a statute, either in Canada or in the U.S. According to the CFA Institute’s Regulator and Program Recognition fact sheet, the CFA Institute is designated as a Recognized Educational Institution by Revenu Québec. Furthermore, CFA candidates and charterholders are recognized by several regulatory bodies (such as IIROC) in Canada. However, it’s not evident whether this regulatory recognition would qualify as being “recognized by a statute” for tax purposes.

Then there are your CFA examination fees. Can the fees you pay to the CFA Institute to write Level 1, 2, and 3 exams be claimed as a tuition credit? According to the Canada Revenue Agency (CRA), exam fees may be eligible for a tuition credit if the examination is required for you to obtain a professional status recognized under a federal or provincial statute and the status, licence, or certification allows you to practise the profession or trade in Canada.

As is the case with membership fees, it’s necessary to determine whether the professional status of a CFA charterholder is recognized by a federal or a provincial statute. (Note that the test for examination fees appears to be more stringent than the test for membership dues, as CRA does not mention a foreign statute as acceptable for examination fees.)

You could argue that the CFA profession is widely recognized in Canada and the U.S. (based on the CFA fact sheet mentioned above) and should meet the outlined criteria. However, in order to be sure, it seems the CFA profession would need to be recognized in a federal or provincial statute. For instance, the Chartered Professional Accountants of Ontario Act, 2017 recognizes the professional status of accountants. Therefore, accounting students are eligible to claim the fees they incur to write the Common Final Examination. Unfortunately, the answer isn’t as clear for CFA candidates.

If you’re self-employed…

If you’re self-employed and/or carrying on a business, it may be possible for you to deduct CFA membership and examination fees from your income. The test is less stringent in this case. In order for an expense to be deductible, it must be incurred for the purpose of gaining or producing income from business or property. Therefore, if you can establish a reasonable link between the membership fees (which are required to maintain the CFA designation) and your business income, then your fees are likely deductible.

The rules are more complicated for your CFA examination or course fees. In CRA’s view, training or courses taken to acquire a new skill is a capital investment. Therefore, fees relating to courses taken that lead to obtaining a degree, diploma, or professional qualification wouldn’t be deductible in the year in which they were incurred. Instead, these costs would form a “depreciable balance,” which would be amortized at a rate of 5 per cent per year. (In other words, a deduction of 5 per cent of the balance would be allowed annually if these fees were incurred in relation to a business.) On the other hand, CRA holds that fees relating to courses taken for the purpose of maintaining, updating, or upgrading an existing skill would be deductible in the year they’re incurred.

So, what does that mean if you have your own business? Your CFA examination or course fees would be treated as a capital investment and would be deductible at 5 per cent per year (based on the net balance). Your fees incurred in relation to professional development courses (such as the ones offered by CFA Society Toronto) that were taken to update or enhance an existing skill would be fully deductible from your business income.

The tax treatment of the aforementioned items will depend on your circumstances. If you’re an employee, it’s not entirely clear whether the membership fees and examination fees would be deductible.