Students and Income Tax

Congratulations on your child being accepted to University/College. This is a new and exciting time. It is also one of the costliest life events for a family. We want to make you aware of the various tax credits, deductions, and types of income applicable to post secondary students to ensure you minimize these costs.

Common Tax Credits for Students

Tuition Tax Credit

The tuition tax credit is the most common tax credit available to students. It is a non-refundable tax credit, which means the amount can only reduce the student’s tax payable (calculated before any installments or tax withholdings) to zero. For federal purposes, it is calculated at the lowest personal income tax rate of 15%. This rate varies for provinces that have a tuition tax credit. Currently, all provinces except for Ontario, Saskatchewan and Alberta allow for provincial tuition credits.

The general requirement to qualify for this credit is that tuition fees must be paid to a qualified post secondary institution for individuals 16 years of age or older. The amount eligible for the tuition tax credit is not the same as the amount that was paid to the post secondary institution. The post secondary institution will issue a T2202—Tuition and Enrolment Certificate to the student for this amount. This form will need to be downloaded from the post secondary institution’s online portal in February of each year.

As previously mentioned, the tuition tax credit is a non-refundable tax credit so there may be instances where the entire credit is not used. If this is the case, a maximum amount of $5,000 from the current year federal credit can be transferred to a student’s spouse or common-law partner, or the student or student’s spouse’s parent or grandparent. Unused tuition credits can be carried forward indefinitely.

Interest Paid on Student Loans

Only interest paid on loans provided under the Canada Student Loans Act , Canada Financial Assistance Act , Apprentice Loans Act , or similar provincial or territorial programs qualify for a tax credit. Interest paid on student loans through a bank or another financial institution do not qualify for the credit. This credit can be carried forward for five years but is not available for transfer to another individual.

Common Deductions from Income

Moving Expenses

Expenses incurred to move to attend a post secondary institution can be deducted against the taxable part of scholarships, fellowships, bursaries, certain prizes and research grants. Moving expenses incurred to relocate for a summer job are deductible against income earned from that job. Furthermore, moving expenses associated with returning to a post secondary institution after a work semester as a co-op student can also be claimed. The deduction of these moving expenses is subject to the student’s new home being at least 40 kilometres closer to the post secondary institution or new place of work.

Common Types of Income

Scholarships, Fellowships, Bursaries and Grants

Scholarships, fellowships and bursaries are not usually taxable provided they are for a qualifying educational program and the student is in full-time attendance. The non-taxable portion of scholarships, fellowships and bursaries received by part time students are limited to the tuition paid plus costs of program related materials.

The taxability of grants is dependent on the type of grant, and we would be happy to discuss this with you should grants be applicable to your situation.

Registered Education Savings Plan (RESP)

The educational assistance payments, such as the government contributions made to the RESP and any income earned in the RESP are taxable to the student when the funds are distributed to the student.

Sending a child of to school is not only costly, but also stressful.

For more information, please contact info@gytdcpa.com or 1 844-GYTD-CPA

GYTDCPA.com-Students and Income Tax

.pdf

Download PDF • 62KB