Ways to Turn Education Expenses into Tax Credits
For your Canadian tax returns, you are eligible to claim the 15 percent non-refundable federal tax credit for eligible tuition, education, and textbook costs incurred in the year, plus any unused amounts you weren’t able to use that are carried forward from previous years.
If you can’t fully make use of the current year tax credit you may be able to share it with a supporting spouse/common-law partner, parent, or grandparent. In addition to the tax credits provided for tuition, education, and textbook costs, there are additional tax savings available to students.
The total of the tuition, education, and textbook credit amounts carried forward from one or more previous years is shown on your Notice of Assessment. Enter your tuition, education, and textbook carried forward amounts at the top of schedule 11 of your current year return.
Making the claim
This part deals with:
Claiming tuition fees
Claiming the education amount
Claiming the textbook amount
For federal tax purposes, the detail of the tuition, education, and textbook amounts is entered on schedule 11 and the total amount being claimed in the current year is carried over to schedule 1. Respective forms for provincial/territorial tax are to be completed as well.
Qualifying courses include the majority of those at the post-secondary level or those that develop or improve skills in an occupation. You must also have paid more than $100 during the year to each educational institution whose fees you claim. You can’t claim other expenses related to pursuing your education, such as board and lodging. These costs are the reason why an education amount is available to students.
Eligible tuition fees are noted on form T2202A, Tuition, Education and Textbook Amounts Certificate. This tax slip will be issued by the institution that provided the educational program.
To claim tuition fees paid to an educational institution outside Canada, you must receive from your institution a completed form TL11A, Tuition, Education and Textbook Amounts Certificate — University Outside Canada.
The education amount is a fixed amount based on the number of months a student was enrolled in a qualifying educational program. The amount is:
$400 for each month the student was enrolled as a full-time student,
$400 for each month the student was enrolled as a part-time student and the student has an impairment in mental or physical functions,
$120 for each month the student was enrolled as a part-time student.
You cannot claim more than one education amount for a particular month.
In addition to receiving some tax relief through the tuition and education amounts, students can also claim a textbook amount to offset the cost of their textbooks. The credit amount is calculated as follows: $65 for each month for which you qualify for the full-time education amount, or $20 for each month for which you qualify for the part-time education amount.
Transferring or carrying forward tuition, education, and textbook amounts
In many cases, students simply do not have the cash flow to pay for their own education. However, for tax purposes, the student — not the person who paid the fees — gets first crack at claiming the tuition, education, and textbook amounts. It’s only when you don’t need the full tax credit from these amounts to reduce your tax bill to zero that you can transfer the tuition, education, and textbook amounts to another person.
Complete the back of form T2202 or form T2202A, as well as schedule 11 on your tax return, to calculate and designate this transfer. The maximum amount you may transfer to a spouse/common-law partner, parent, or grandparent is $5,000 (for federal tax purposes). Any excess is carried forward to the following year for you to potentially claim in that year or perhaps a subsequent year.
Receiving a transfer of credits
A student who does not need tuition, education, and textbook amounts to reduce federal income tax to zero may be able to transfer the unused portion to you if you are a parent or grandparent of the student or of the student’s spouse/common-law partner. The maximum amount that each student can transfer is $5,000 (for federal tax purposes) minus the amount the student needs, even if an unused amount greater than this still exists.
To calculate the transfer amount and to highlight to whom the amount is being transferred, the student has to complete the reverse side of form T2202, Education and Textbook Amounts Certificate, or form T2202A, Tuition, Education and Textbook Amounts Certificate.
If a student’s spouse/common-law partner claims amounts on line 303 (spousal/common-law partner amount) or 326 (amounts transferred from your spouse/common-law partner) for the student, a parent or grandparent cannot claim the tuition, education, and textbook amount transfer.
Get more credit for your student loan interest
You’re eligible for a 15 percent non-refundable federal tax credit for your student loan interest if your loan was obtained under the Canada Student Loans Act, Canada Student Financial Assistance Act, or a similar provincial/territorial government law for post-secondary education.
The credit can be claimed only by you, the student, even if the interest was paid by another person. The amount of interest paid is to be noted on line 319 of schedule 1 of your tax return.
If your federal tax is already zero the tax savings from the tax credit on the student loan interest can be saved for a claim in the subsequent five years. Conversely, if you missed claiming student loan interest in the past five years it can be claimed for a tax credit in the current year.