Going to school in Canada isn’t cheap. Tuition, textbooks, living expenses, transportation fees, it all adds up quite quickly for students-and their parents. But what they might not be aware of is that the Canadian tax system offers a considerable number of education-related credits and deductions to ease that financial burden. They’re not tricky to claim-if you know what is available.
Whether you’re a first-year undergraduate, a graduate student, a part-time learner, or a parent supporting a child in school, the tax benefits outlined here are ones worth understanding in full. And if the details become complex — particularly when scholarship income, international studies, or carry-forward amounts are involved — a professional who handles corporate tax returns in Toronto can help ensure every eligible credit is claimed correctly.
The tuition tax credit
The tuition tax credit is the most famous student benefit, and it is still a benefit worth claiming. The tuition you paid to a designated post-secondary educational institution in Canada (or, in some cases, outside the country) qualifies as a non-refundable tax credit at the federal level.15% federally, with provincial credits in addition.
You will need a T2202 form from your school, which is also called theTuition and Enrolment Certificate. This form establishes that you have paid for the eligible tuition amount, the months you enrolled full time or part time, as well as to which taxation year the claim applies. Save these forms because you will need to have the credit supported on your return.
You can carry any unused portion of the tuition credit forward indefinitely until you use it to offset income in future years when you’re earning more-making the tuition credit a long-term benefits!
Transferring tuition to a parent, spouse, or grandparent
If a student’s entire tuition credit isn’t being used for their own return, up to $5,000 of the credit can be transferred out to a parent, grandparent, spouse or common law partner. This is something that a lot of people aren’t aware of, where families with lower-income students can pass along the tuition benefit to the person who paid out of pocket.
The student is responsible for indicating the transfer on their own return before any flow is initiated to the helping family member(s). However, any transferred amounts are deducted from the carryover amount for the student, so it may be worth consulting the student when making the decision as to how much to transfer rather than holdback.
Interest on student loans
You may be able to claim the federal non-refundable tax credit for the interest on your federal student loan (Canada Student Loans Program), or any other provincial student loan (under the provincial loan program). This credit can be carried forward for five years-similar to the amount transferred from your institution.
This is a Credit that people quite often don’t claim because they either pay off student loans before they earn serious money and so don’t realize the interest is deductible; or they fail to claim it because they have no idea it’s available to them. It is actually very easy to keep a record of the interest paid on student loans – your lender already does that annually – but you do have to keep the records and claim using them.
Scholarship, bursary, and fellowship income
A large number of students are awarded a scholarship, bursary, or fellowship to support their studies. How these sums are taxed depends on the nature of the program you’re pursuing.
Income received from scholarships and bursaries for students taking a program which entitles a tuition tax credit is excluded from income until the points of the expenses to which they relate are exceeded. This is the general rule for most scholarship income received during enrollment in a qualifying program.
Fellowship money at the graduate level also can be a little more complicated, particularly if you are getting a research stipend. For example, finding out if you are getting scholarship money or whether it is employment income or research income can affect how much it is taxed, if you use it you can use it to contribute to an RRSP , and if the money is subject to the Canada Pension Plan.
Moving expenses for education
This deduction may be available to students who moved to attend a post-secondary institution if the move was more than 40 km closer to the institution. Deductible expenses include cost of using a mover’s service, temporary accommodation while transitioning to the institution, costs for breaking a lease, and transportation costs. The deduction can only be applied to scholarship/bursary/research income derived from the institution, but in the case of students who had significant amounts of such income, it can result in a zero tax bill.
Students returning home after graduation and relocating for a new position may also be able to deduct their moving expenses against income earned in the new location if the move qualifies under the standard employment moving expense provisions.
See also: Streamlining Operations in Vacation Rental Management Businesses
The disability tax credit for students
Individuals who have a permanent physical or mental impairment that affects their ability to perform basic activities of daily living may be able to claim the Disability Tax Credit (DTC). If approved for the DTC, individuals receive a large non-refundable credit for them at the federal and provincial level. DTC eligible students are also eligible to apply for the Registered Disability Savings Plan (RDSP) which has additional tax benefits.
There is a certification requirement to apply, however, the credit, once received, may backdate to past years in some situations. So you could receive a large refund for years where you didn’t even claim this credit.
RRSP contributions as a student
There are a lot of students who never think about an RRSP, and this is surely justified when income levels are low and their focus is on paying rent and grocery bills. However, some students do receive employment income while studying (perhaps through a part-time job, summer employment or co-op work terms), and those students will have amassed some RRSP contribution room. That room accumulates and reflects in future years, and it is an important tool for tax planning to contribute to an RRSP when income levels are higher.
Others might choose to save up room and not contribute at school, with plans to make catchup contributions early on in their career when their marginal tax rate is higher and the claim is more valuable. There is no penalty or cancellation of the RRSP room created for not contributing that year.
Getting your head around Canadian student tax benefits can mean many thousands of dollars in tax savings by the time you’ve completed your degree. These credits don’t just materialize. With a few minutes attention each year they really do accumulate.
Conclusion
To sum up, Canadian students can take advantage of many tax credits, deductions and savings programs that can ease their financial burden during post-secondary education. Some examples include tuition tax credits, student loan interest deductions, scholarships exemption, moving expense deductions and future RRSP saving planning. All these options can provide substantial long-term financial benefits if utilized correctly.
The best thing for students and families to do is to be prepared by keeping all tax forms and knowledge of the credits available each year so that they can get the maximum refund they deserve and can work toward strong financial practices. Students when working toward college funding want the support of Webtaxonline for support in student tax filing, education credits, and tax planning.
