Students and Taxes
In addition to subsidizing educational programs, providing scholarships, grants and bursaries, our governments can help us to finance our education expenses by providing students with income tax credits for various expenses that we incur while we pursue our education.
Many of these income tax credits require students to retain receipts that document these expenses and some of the available credits are automatically documented by the educational program the student attends.
Recording all of the eligible education expenses is important even if the student does not have any taxable income in the year the expenses were incurred. This is because the expenses not deducted can be carried forward and deducted against future taxable income. This can result is a big income tax benefit for students that find full-time employment after they leave school.
Another benefit of filing an income tax return, even through the student does not have any taxable income, is that up to $5,000 of eligible education expenses (tuition and education/textbook credits) can be transferred to a parent, grandparent or spouse for deduction against their taxable income, in the year the credits are generated.
Note: Tuition and education/textbook credits carried forward to future years and not transferred by the student to a parent, grandparent or spouse in the year they are incurred cannot be transferred in future years. They must be retained and used by the student. The student designates the credit amounts eligible for transfer on the back of form T2202 or T2202A, which is provided to the student by the educational institution.
Another benefit for students that file an income tax return, regardless if they have any taxable income is that they will then be able to apply and receive GST/HST credit cheques issued by the government. These credit payments can add up to several hundreds of dollars each year.
Remember: The information provided by InvestingForMe is for reference purposes only. You should seek advice from an income tax professional to ensure that you are maximizing the educational tax credits available to you.
The Canada Revenue Agency publishes a reference guide, Students and Income Tax, to assist students with their understanding of the tax credits that are available to them.
Below are a few descriptions of the expenses that students may be able to deduct so they can take full advantage of the credits our governments provide:
Tuition Fees Certain educational fees qualify for income tax credits if they are incurred while attending a qualifying educational program. For example fees that would qualify are
- Admission fees
- Charges for the use of library and laboratory facilities
- Examination fees
- Application fees
- Fees for certificates, diplomas or degrees
- Mandatory computer service fees
- Academic fees
- Book costs that are included in the total fees for a correspondence course
- Athletic and health fees paid to a qualifying educational institution
Education Amount Credits If you are enrolled in full-time studies you can claim an education amount equal to $400.00 per whole or part month that you are enrolled in a qualifying educational program. If you are a part-time student you may be eligible to claim the part-time amount equal to $120.00 for each whole or part month in the year.
Textbook Amount Credits If you are eligible for the Education Amount Credit, then you are eligible to claim the Textbook amount, which is equal to
- $65.00 for each month you qualify for full-time education amount, and
- $20.00 for each month that you qualify for the part-time education amount
Important Note: April 1, 2016 - The Federal government's 2016 budget proposes to eliminate the federal education and textbook tax credits effective January 1, 2017. (This measure does not eliminate the tuition tax credit. Unused education and textbook credit amounts carried forward from years prior to 2017 will remain available to be claimed in 2017 and subsequent years.)
Eligible Moving Expenses If you are a full-time student you may be able to deduct moving expenses if you have moved to take the courses. You must have moved at least 40 kilometres closer to the new educational institution.
Interest Paid on Student Loans For a loan made to you under theCanada Student Loan Act, the Canada Student Financial Assistance Act, or similar provincial or territorial government laws, you can claim the loan interest paid by you or a person related to you in the current year or any of the preceding five years. As this is a non-refundable credit, if you have no taxable income for the year you are better off not to claim the interest expense, but rather carry it forward for use in future years when you have taxable income.
Child Care Expenses You or your spouse may have paid for someone to look after your child so one of you could go to school. The expense may be tax deductible only if, at some point in the year, the child was under the age of 16 or had a mental or physical impairment.
Public Transit You may be able to claim expenses incurred from public transit such as local buses, streetcars, subways, commuter trains or buses or local ferries. The expense must be for passes that provide unlimited travel for the duration of the pass to qualify.
Note: If you live anywhere in Canada, you may be eligible for income tax credits offered by provincial and territorial governments. You should seek the advice of an income tax professional to ensure that you are maximizing the income tax credits available to you so that you are minimizing the income tax you pay in the current and future years.