The cost of education rising every year and the government has recently increased its tax assistance to students. Here are some basic tips to help ensure your student is taking full advantage of the tax relief the government is offering[*]:
Scholarships and bursaries are not taxable and not reported on the student's income tax return when the student is registered in a program that entitles the student to claim the Education Tax Credit.
Interest paid on a student loan is eligible for a tax credit when the loan is part of a federal or provincial student loan program. The student cannot claim interest paid if the student loan has been renegotiated with a financial institution or has been consolidated with other loans. If the student has no tax payable in the year the interest is paid, the amount can be carried forward and applied in any of the next five years.
Other tax deductions available to students:
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Moving expenses – if a student moves more than 40 kilometres to be closer to school or to take a summer job.
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Child care expenses may be claimed by the higher earning spouse/common-law partner if the lower income spouse is enrolled in a qualifying secondary or post-secondary program.
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GST rebates -- a student must apply for the rebate on his/her tax return each year.
Other tax credits available to students:
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The Canada Employment Credit on the first $1,000 of employment income.
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A Tuition, Education and Textbook Credit for:
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Tuition fees when students are enrolled in full-time or part-time studies and when the fees are more than $100 for the year.
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An Education amount for each month of enrolment -- $400 a month for full-time students (or part-time students with a disability) and $120 a month for part-time students.
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Textbooks to a total of $65 a month for full-time students and $20 a month for part-time students.
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A Public Transit Pass Credit for monthly or longer transit passes. Receipts are needed to make this claim.
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Unused Tuition, Education and Textbook Credits can be transferred to a spouse, common-law partner, parent or grandparent when the student first uses the tuition, education and textbook amounts to reduce taxes payable in that year to zero. The maximum transfer amount is $5,000 minus the amount used by the student. Alternatively, any unused tuition, education, and textbook amounts can be carried forward indefinitely by the student.
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Parents may claim for a dependent under 19 years
You can find out more about tax-saving strategies for students and everyone else in your family from a financial advisor.
[*] Information in this article based on federal rules only. Provincial and territorial rules may differ.
Noël Hémond, CFP
Financial Planner
Investors Group
Courriel: Noel.Hemond@investorsgroup.com
Tel: 514-817-3483