Tax Tips for Students
Do More with Your Student Dollars Tax Tips for Post-Secondary Students in Ontario
TUITION FEES AND EDUCATION CREDITS
Full-time students may claim a federal credit of 15 per cent of their eligible tuition fees, plus an education credit of 15 per cent of $400 per month, or $60 in 2012. The equivalent Ontario provincial credit is indexed; students may claim a monthly credit of up to 5.05 per cent of $506, or $26 (the indexed amount is determined annually and can be found on the Ontario TD1 form).
Students registered to attend part-time studies may also claim the tuition fee credit of 15 per cent of eligible fees; in addition, they may deduct $120 a month toward the 15 per cent federal education tax credit, which works out to $18 and $151 per month (indexed) toward the 5.05 per cent Ontario provincial education tax credit, which equals $8.
Students with a Disability
Part-time students with a disability may qualify for a fulltime credit. Individuals with a disability who are enrolled in approved Human Resources and Skills Development Canada (HRSDC) or equivalent approved training programs can also deduct those related expenses.
Career-Related, Post-Secondary Education
The education tax credit also applies to students who are pursuing career-related, post-secondary education at their own expense (e.g., the CPA/CGA program of professional studies).
OTHER TAX CREDITS AND EXEMPTIONS
Textbook Tax Credit
There is a non-refundable federal “textbook tax credit” of 15 per cent of $65, or $10, to cover each month the student is eligible to receive the full-time education tax credit and 15 per cent of $20, or $3, for each month they are eligible for a part-time education tax credit.
Scholarships, Fellowships and Bursary Income
All scholarship, fellowship or bursary income with respect to post-secondary education or occupational training in a program — one that entitles the student to claim the education tax credit, are fully exempt from taxation.
Online Versus Onsite
It is not always necessary for a student to be in physical attendance at a qualified institution in Canada and, in many cases, a designated institution outside Canada, to claim either the tuition or education tax credits. For example, online course participation via the website of a recognized post-secondary institution may also qualify the taxpayer for both tax credits.
Unused Tuition, Education and Textbook Credits
Unused tuition, education and textbook credits may be carried forward indefinitely to offset the income of students in future years.
Alternatively, students may transfer unused federal credits of up to $5,000 (an indexed $6,503 for the Ontario portion of this credit), reduced by their income in excess of personal credits, to a supporting person — such as a parent or grandparent. However, the transferred credits must be claimed in the year they were incurred.
Students who are attending an accredited institution outside Canada — generally this will translate to a university-level course of at least three consecutive weeks duration leading to a degree — are eligible to transfer their unused credits, provided they owe Canadian income tax.
However, students who reside in Canada near the U.S. border who are registered in (and commute to) a designated educational institution in the U.S., might be able to claim or transfer a tuition credit for a course of any duration.
Other Possibilities for the Tuition Credit
There are some mandatory ancillary charges — such as fees for computer services, labs, health and athletics — that are also eligible for the tuition credit.
Mandatory computer-service fees eligible for a tuition credit could include such things as the use of a laptop computer and applicable software.
The Canada Revenue Agency (CRA) has ruled that students may deduct tuition fees paid to an accredited post-secondary institution for audit/hearer courses in which they attend lectures, but do not write examinations or receive credit.
STUDENT LOAN INTEREST TAX CREDIT
A 15 per cent federal tax credit and a 5.05 per cent Ontario provincial tax credit are available on the repayment of interest on federally or provincially approved student loans. To be eligible for this credit, students must consolidate their loans with an authorized lender after graduating from the post-secondary institution and assume responsibility for paying interest by the first day of the seventh month, following completion of their studies.
Students have the option of applying the non-transferable credit to either the current year or to carry it forward to any one of, or spread over, the next five taxation years.
Even students who didn’t earn enough money to necessitate paying income tax should file an income tax return. The rationale for this is because 18 percent of earned income from the previous year is eligible to be contributed to an RRSP.
Students don’t have to deduct an RRSP contribution in the year in which it was made; instead, they can carry it forward for deduction in a future period when they have sufficient income with which to offset the RRSP contribution.
RRSP EDUCATION WITHDRAWALS
Taxpayers are able to withdraw money from their RRSP for qualifying full-time education and training for either themselves or their spouse/common-law partner — but not both parties at the same time — on a tax-free basis. For individuals with a disability, this provision, which is known as the Lifelong Learning Plan (LLP), covers both full- or part time education and training.
LLP withdrawals may not exceed $10,000 in a year and $20,000 over a four-year period. Taxpayers can participate in the plan as many times as they wish but may not begin a new plan before the end of the year in which all repayments are made for previous withdrawals. Withdrawals are generally repayable in equal installments over 10 years, beginning about five years after the first withdrawal (sooner if the student fails to remain in the program full time).
Students in medical residency programs that last for at least three months and qualify for the tuition fee tax credit may also participate in the LLP.
Many lower-income earners, including students, may be eligible for an HST credit. If so, don’t forget to apply for the HST rebate on the tax return. Check with a certified general accountant to determine how the tax credits detailed here apply to your specific situation.
CHILD CARE EXPENSES
Parents who spend at least 12 hours per month studying in an educational program lasting at least three consecutive weeks at a secondary school, college, university or other designated educational institution, are eligible to claim expenses incurred for child care expenses while they or their spouse/common-law partner attend certain schools.
Students that were in full-time attendance at a post-secondary educational institution in Canada, and who moved at least 40 kilometers within Canada for employment purposes, may claim moving expenses against income earned from a full- or part-time job (including a summer job) the year the move took place or the following year. This also applies the year after graduation.
Eligible moving expenses include items such as:
- Travel costs (e.g., reasonable amounts for meals and accommodation) to move the individual and members of their household.
- Storage costs for household effects.
- Costs for up to 15 days of temporary board and lodging near either residence.
- The cost of cancelling a lease or selling the old residence as a result of the move.
- The cost of connecting or disconnecting utilities as a result of the move.
CREDIT FOR PUBLIC TRANSIT PASS
The federal government offers a non-refundable tax credit for taxpayers who purchase transit passes generally totaling at least one month’s duration for various modes of transportation (e.g., a local bus, streetcar, subway or commuter train). Students should save their passes and obtain receipts in case they are requested by CRA.