University and College Students Get Tax Breaks
By Nizam Shajani, CPA, CA, MBA, Partner
Going to University or College – or sending your kids there is expensive. To make this more affordable, consider some of these tax breaks to reduce taxes that you may owe.
Tuition fees can be deducted from income. This includes the amount paid for admission, library, laboratory, exemptions, examinations, applications (if subsequently enrolled at that institution), confirmations, charges for certificates, diplomas, degrees, memberships related to an academic program, mandatory computer service fees and academic fees. The total tuition must exceed $100 for each educational institution attended and certain criteria must be met such as eligibility of the educational institution, attendance at a university if outside of Canada, and the program taken.
The amount of the credit is calculated as the lowest personal tax rate multiplied by the amount of eligible tuition fees paid for the year. The unused amount can be carried forward to a future year or be transferred to a spouse, parent or grandparent.
Education credits will not be available for the 2017 and future tax years, however are available for your 2016 tax year. The education credits are in excess of tuition fees based on $400 per month for full time students for each month of enrolment. Part time students can claim the additional amount at $120 for each month of enrolment. Credits not claimed by a student can be transferred to a parent or their grandparents. Unused credits can be carried forward.
You cannot claim the education amount if you received a grant or were reimbursed for the cost of your courses (by your employer or a person with whom you deal at arm’s length) or received a benefit as part of the program (such as fee meals and lodging).
Post-secondary scholarships, fellowships and bursaries that are received to support you in the program are not taxable if you are enrolled in that program full-time. Part-time students may receive a scholarship exemption up to the tuition fees and program related materials.
Research grants are generally to pay for expenses related to a research project. Related expenses would include salaries and wages for an assistant, minor equipment and supplies, laboratory charges and travelling expenses (including meals and lodging). Total expenses cannot exceed the amount of the grant. The net amount remaining from the grant less expenses is taxable as other income.
Text Book credits will not be available for the 2017 and future tax years, however are available for your 2016 tax year. Textbook credits are in excess of tuition fees and education credits and based on $65 per month or enrollment for full time students. Part time students can claim $20 per month for text books. Credits not claimed by a student can be transferred to a parent or their grandparents. Unused credits can be carried forward.
You will need a tax form from your institution to make these claims. The form would be a T2202A (tuition, education and textbook amount certificate), TL11A (for university outside of Canada), TL11B (for flying school or club), TL11C (commuter to the United States) or TL11D (educational institutions outside of Canada for a deemed resident of Canada). These forms should be completed based on the calendar year the courses were taken and not the year the fees were paid.
Generally, a course qualifies if it was taken at the post-secondary level or it develops or improves skills in an occupation and the educational institution has been certified by Employment and Social Development Canada.
Credit for Student Loan Interest can also be claimed or carried forward for five years. Note that if you do not have taxes owing for the year – you should consider not claiming the interest paid in the current year return and carrying it forward to claim in a future year when you can apply this credit against any taxes owing.
You can transfer up to $5,000 less amounts you claimed on your return for tuition, education and text book amounts to your spouse, parents or grandparents. You will have to first reduce the amount you own on your own return to $nil and can then transfer the remainder. You can also carry forward any unused portion to the next year in which you owe tax.
Other deductions you may wish to consider as a student include moving expenses to attend post-secondary school (may also be deductible under certain circumstances), the Canada employment amount and the Public transit amount.
This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action.