Continuing your education is always an ambitious step forward. But it sure isn’t a cheap dream to make come true.
Thankfully, Canada has a tuition tax credit to help offset some of those costs.
This article will explain how the tuition tax credit works, who is eligible for it, and how to claim it.
Let’s dive in!
What is The Tuition Tax Credit in Canada?
The tuition tax credit is a type of educational tax credit in Canada that post-secondary students or their parents can claim to reduce the amount of payable taxes. It’s a non-refundable credit that can be claimed for up to $5,000.
Canada’s government has made the federal tuition tax credit available for all students, which applies to the federal income tax in a specific year. However, keep in mind that some provinces/territories offer additional tuition tax credits as part of their separate tax programs, according to their own province’s rules on taxation.
Read More: What’s The Inheritance Tax in Canada?
You can calculate your tuition tax credit by multiplying the amount you paid for tuition by your federal and provincial, or territorial tax rate.
For example, let’s assume your federal tax rate percentage for the year is 15%, and you paid $3,000 in tuition.
3,000 x 0.15 = 450
This means that you’ll get a $450 federal tuition tax credit.
Eligibility Requirements for the Tuition Tax Credit
To qualify for the tuition tax credit in Canada, you have to:
- Be a student at a post-secondary education institution in or outside of Canada (part-time or full-time)
- Be at least 16 years of age
- Pay a tuition fee that’s higher than $100
However, if the individual student is enrolled in a post-secondary institution for courses that are not quite matching the post-secondary level, they will still be eligible for the tuition tax credit if they enrolled to obtain new skills or improve their skills for a particular occupation.
Additionally, costs paid for gaining a certain certificate or license to obtain a professional status, be a tradesperson, practice a profession or trade on Canadian grounds are also eligible for a tuition tax credit.
However, you must pay these fees to an official educational institution, professional association, ministry or other similar acknowledged Canadian institution that provides occupational, trade, or professional examination. Additionally, these costs can’t be higher than $250.
Since we’ve covered the eligible tuition fees, let’s cover the fees which can’t be considered tuition fees eligible for a student’s tax credit.
- The tuition fees were initially paid/reimbursed by an employee of the student or their parents when this amount isn’t included anywhere in the incomes tax certificate.
- The tuition fees were entirely covered by a federal, provincial or territorial job training program, and this is not included in your income tax certificate.
- The tuition fees were paid by a federal program for helping athletes, and this payment wasn’t included in the student’s income.
- You are working on your General Education Development (GED).
Here are some other student costs the tuition tax credit in Canada doesn’t cover:
- Parking and transportation tickets
- Student’s local activities (out of the curriculum
- Exam fees
- Administrative penalties
- Medical expenses
How To Claim The Tuition Tax Credit in Canada?
If you meet all the above-mentioned criteria, you can apply for the tuition tax credit within your educational institution. You’ll need to fill out a special form that varies based on your location and student status:
- The T2202 Form is the most regularly used certificate for claiming tuition and enrollment in Universities within Canada
- The TL11A Form is used for claiming tuition and enrollment fees for Universities and institutions outside of Canada
- The TL11C Form is used for students who commute to the United States
- The TL11D Form is used for tuition fee certificates in institutions outside of Canada for deemed Canadian residents
If you’re studying outside of Canada or commuting in the States, you will need a different form.
What Happens To Your Unused Tax Credit?
In Canada, this education tax credit is non-refundable. This means that if your tuition amount is larger than the owed federal tax or provincial tax – the credit will be used only for reducing educational fees and not for covering other tax expenses for the following year.
Read more: When Are Taxes Due in Canada?
So, any unused tuition and education amounts can either be transferred to cover such expenses in the next year, or transferred to someone.
However, if you decide to carry forward the unused amount of your tuition, you’ll still need to file a tax return for that year.
Carrying forward is beneficial because it allows you to make the most of your tuition tax credits, even if your income is low while in school.
When you finish school, you can carry forward the unused tuition credits and utilize them to supplement your post-secondary earnings. This is a smart way to reduce your taxes in Canada.
On the other hand, transferring tuition tax credits works different from carrying forward. Namely, you can transfer up to $5,000 of the tuition amount for the current year, minus your claimed amount.
Recipients of the tuition tax can transfer it to a parent or a grandparent, a spouse or common-law partner, or a spouse’s or common-law partner’s parent or grandparent.
The tuition tax credit in Canada is a financial aid you can apply for if you meet the criteria lawfully demanded by the CRA. You can apply for the tuition tax credit in Canada even if you’re studying abroad.
This credit can greatly assist parents and students in their journey toward a University diploma or getting a proper certificate for doing certain jobs and trades in Canada.
Even if you get approved for a larger amount of credit than you can use in a single year on a scholarship and other educational fees – don’t worry. You can save them for when you need them but only get to spend them for educational purposes.
The tuition tax credit allows you to subtract a certain amount of money you have paid for tuition from the taxes you owe. It’s a bit like getting a discount on your taxes for the amount you have paid for tuition.
Students can claim the tax credit each year that they pay for tuition, and they can use it to reduce either their federal income tax or your provincial/state income tax.
This can simply be done online through CRA My Account. You can check your Notice of Assessment from the previous year if you don’t have an online form registered.
Each year, you can claim, transfer or move forward up to $5,000 of tuition tax credit in Canada.
This student’s financial aid funds can be used solely to cover educational fees, such as tuition and scholarship expenses. Books, accommodation, additional activities and transportation fees are excluded.