The cost incurred in taking a COVID-19 test will be tax deductible for you as long as the test was used for a work-related purpose.
The legislation has passed through the parliamentary process and will become law. It applies from 1 July 2021, which means you can make claims in your next income tax return.
The new legislation provides a specific deduction and removes any previously held ambiguity about whether an expense for a COVID-19 test was deductible.
For the purchase of a COVID-19 test to be tax deductible:
must have paid for the test and not been reimbursed by your employer, and
were required to take the test before going to work because:
of a public health order
your employer has asked or required you to take one, or
you were previously a positive case and needed to show your employer a negative test before going back to work.
It is important to point out that the deductibility is solely on the requirement to take a test. The test result, or whether you actually worked on the day you took the test, is irrelevant.
Apportionment
You will need to apportion your deduction when you have bought a packet with multiple tests and you have only used some of them for work-related purposes.
Substantiation
It is important to always keep records and receipts of items where you want to claim a tax deduction.
However, if you don’t have the receipts handy, don’t worry. We’ll ask you at tax time to come up with a reasonable calculation for your claim, as the new law comes under rules where you might not have a receipt. This rule generally allows you to make a claim up to $300 for various expenses in your tax return.
If you need to know more about the new allowable deduction, please give our office a call. We would be delighted to discuss this with you further.