University and College Students Get Tax Breaks
By Nizam Shajani, CPA, CA, MBA
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 the taxes that you may owe. Even if this credit is not of value in the current year, transfer and carry forward rules allow you to make use of these credits.
Tuition fees can provide valuable credits that reduce the amount of tax that are payable. Tuition 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.
You will need a tax form from your institution to make these claims. If you went to an institution in Canada, they should provide you with a T2202A (tuition, education and textbook amount certificate). This is usually mailed to you or downloaded from their website. If you went to a university outside of Canada, you will need to ask them to complete a TL11A (for university outside 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 for individuals over the age of 16 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.
How Much it this Worth?
The amount of the credit is calculated at the lowest personal tax rate (15%) multiplied by the amount of eligible tuition fees paid for the year. If you have paid tax that was deducted by your employer and remitted to CRA on your behalf or if you owe tax, this could result in a refund or reduce the amount owed. A $5,000 tuition payment would reduce your taxes by $750.
Don’t Need It?
If you don’t earn at the moment or don’t earn enough to pay taxes, the unused portion of the tax credit can be carried forward to a future year or be transferred to a spouse, parent or grandparent. You can transfer up to $5,000 less any amounts you claimed on your own return. You do have to first reduce the amounts you owe on your own return to $nil before transferring the remainder available. You can also carry forward any unused portion to the next year in which you owe tax.
Post-secondary scholarships, fellowships and bursaries
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.
Student Loan Interest
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 may also wish to consider deducting moving expenses to attend post-secondary school. This may be deductible under certain circumstances
No Longer Available
Education and textbook credits are no longer available. However, if you are catching up a few years of returns – note these were available for the 2016 and previous years. Unused education and textbook credits from previous years (when they were available) continue to be available to carry forward.
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. © 2020 Shajani LLP