Tuition fees keep rising and for many those costs play a growing role in the family budget. Luckily there’s help. Today we’ll look at the different kinds of education tax relief, and whether or not you’re eligible to save when it comes time to year end tax planning.
If you paid tuition fees yourself, in Ontario in 2011 you qualify for a non-refundable, combined 20.05% federal and provincial tax credit. If you paid fees for your children or other dependents, you may be able to transfer part of this credit to your own return.
For this to work, the fees must be paid to a Canadian university, college or other post-secondary educational institution certified by Human Resources and Skills Development Canada. If the student studies abroad, foreign postsecondary fees may be covered too. A change in the 2011 budget lets someone studying at a foreign university claim the tuition credit if they’re enrolled in classes for three consecutive weeks, instead of 13.
Another beneficial change in the most recent budget: if you pay a fee for an exam necessary to obtain professional status or to be licensed to practice a profession in Canada, you can now claim it for tuition.
If you send your children to private school, unfortunately you won’t get a tax credit. But – and an important but – if there’s a religious component to that school, the institution may be able to give you a charitable donation tax receipt, for the part of tuition paid towards religious instruction.
Let’s get back to all the post secondary stuff. You’re entitled to an extra $80 credit for each month you attend a post-secondary educational institution full-time. Part-timers receive a $24 monthly credit as long as they attend an eligible program that’s at least three consecutive weeks long with at least 12 hours of instruction per month. Students with disabilities qualify for the full $80 credit, even if they’re part-time.
If you’re eligible for those education credits, you can also claim a non-refundable textbook credit. It’s worth $87 a month for full-timers, and $27 monthly for part-timers.
If you receive scholarship, fellowship or bursary income, that’s tax-free, as long as you’re eligible for the full-time education tax credit. This applies to courses up to and including doctoral degrees, but not post-doctoral fellowships.
If you earned a scholarship, fellowship or bursary in connection with a part-time program, the tax-free exemption is limited to the cost of tuition and course materials (unless you qualify for the disability tax credit).
For many students, loans are a big part of their financial picture. You can claim a credit for interest paid on student loans under the Canada Student Loans Act or equivalent provincial programs.
What happens when the parent is the student? Single parents and two-parent families where both parents attend school full-time can deduct extra child care expenses. Normally there’s a limit on how much you can claim – no more than two thirds of your net income. For single parents or two-parent families where both parents are full-time students, the weekly limit is $175 per child under age 7 and $100 per child ages 7 to 16. For part-time students, the dollar figure is the same, but it’s monthly, not weekly.
Once all the tax numbers are crunched, pay attention, parents: if your child or dependent can’t use the entire amount of their tuition, education and textbook credits because their income is too low, up to $1,002 of combined federal and Ontario credits can be transferred to you for your own use.
If there are still credits left over, they can be carried forward and claimed against the student’s taxable income in future years. But you can’t transfer them then – only students themselves can claim them later. If you plan well, this can come in handy when the student starts working and has a bigger income.
The list of education tax credits (and the list of rules) is a long one. But it’s one that can earn you big savings —–if you plan ahead and organize carefully.