The Tax Benefits of Education Expenses
Education isn’t cheap, and many people find the cost of tuition a significant barrier to furthering their professional development. For those that choose to enrol in post-secondary education, tax advantages do exist that may help to blunt the cost of that new diploma.
Eligible Tuition Fees
Courses taken at Canadian institutions generally qualify for a tuition tax credit if the course was taken at a post-secondary education institution, or for individuals who are 16 years of age or older at the end of the year in question, who are enrolled at an educational institution certified by the Minister of Employment and Social Development Canada.
Generally, eligible institutions include universities, colleges, cégeps, trade schools and language schools. It is important to confirm that the institution is eligible, as tuition fees can only be claimed after receiving Form T2202, Tuition and Enrolment Certificate from the school.
Additionally, examination fees for licensing and certification may also be eligible for the tuition tax credit. It is important to consult the educational institution, professional association, or provincial ministry that offers the examination as they will issue a receipt substantiating all eligible exam fees.
As an additional benefit to students, qualifying scholarships, fellowships, and bursaries are not taxable to the extent that they are granted with the intent of supporting enrolment. Factors include:
- The duration of the program;
- Any terms and conditions that apply to the award; and
- The period for which support is intended to be provided by the award.
It is important to note that the full tax exemption only applies to full-time students, and that part-time students are subject to a different calculation that includes a portion of the award as income.
The tax benefits available to students also extend beyond the classroom. Moving expenses that are incurred while travelling to and from school after a summer job or work semester as a co-operative student, can be claimed against your employment or self-employment income.
Select childcare expenses are also deductible for children under 16 or for those with a mental and physical impairment if the expenses were incurred to have them cared for while the parent or caregiver attended school.
Finally, interest paid on qualifying student loans are deductible under the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Apprentice Loans Act, or similar provincial or territorial government laws for post-secondary education.. It is advantageous not to claim these amounts for years you do not have to pay taxes, as you can carry forward these expenses for the next five years.
While tuition and other associated costs pose strong financial challenges to prospective students, it is important to recognize the myriad of tax breaks available to those seeking to further their education. It is vital to fully realize the tax implications of your new educational goals, and a tax professional can be critical in minimizing your tax liability and maximizing your savings. If you have questions or need help with the tax benefits available to those receiving an education, give us a call today!
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.