students

What is Tuition Tax Credit in Canada?

Post-secondary education can be a huge financial burden on most Canadian students and their sponsors. This is because the tuition fee itself constitutes a more significant part of a student’s costs. However, there is a way to lessen the burden on students. Qualifying students can apply and claim the Tuition tax credit in Canada.

As a student in Canada, you can apply this tax credit to cover your university expenses. In this article, we will be reviewing tuition tax credit in Canada and what it entails.

What is Tuition Tax Credit?

A tuition tax credit is a non-refundable credit program designed to aid students and their sponsors in offsetting part of their college or university expenses. This tax credit works by reducing any tax a student might be eligible to pay.

A tuition tax credit is more like a coupon that helps students reduces the amount they’ll spend on educational expenses. Each year, every student receives an official tax receipt showing their paid tuition, equipment, books, supplies, etc.

However, fees that include insurance, student health fees, transportation, and others are not eligible for deduction. So, you can claim a tax credit on other expenses; generally, the tax credit will reduce the amount of tax you will have to pay for that year.

Eligibility Requirement for Tuition Tax Credit

Any student over the age of 16 with post-secondary level courses at an educational institute and students continuing education after high school in Canada can claim tuition credits. Canadian students studying outside Canada are also eligible if they’re studying full-time for an average of three weeks.

Eligible students for the tuition tax credit must be offering post-secondary courses or be registered in a qualified trade school. However, if a student attends a university but takes high school courses to prepare for post-secondary courses, such a student may not qualify to claim the tuition tax credit.

Also, the fees you paid to attend the institution should be more than CA$100. The Canada revenue agency carries forward unused amounts to reduce taxes until it’s used up.

Eligible Tuition Fees for Tuition Tax Credit

Eligible tuition fees are as follows:

  • Admission fees
  • Laboratories or library charges.
  • Exemption fees
  • Examination fees
  • Application fees
  • Confirmation fees
  • Certificate charges for degree or diploma
  • Membership or seminar fees related to an academic program
  • Computer service fees
  • Academic fees

Non-eligibility

You can’t claim tuition credit if any of this applies:

  • If an employer paid the fees to you/your parents on your behalf and the amount is not included in you/your parent’s income.
  • The fees were job training programs initiated by provincial or federal, and the amount is not included in the student’s income.
  • The fees are paid under a federal program to help athletes, and the payment or reimbursement is not included in the student’s income.

Exceptions

Nonetheless, the tuition tax credit will not be denied in the following cases:

  • If the student dropped out of the course before completing 3 or 13 weeks under the course, provided they were in full-time attendance before dropping out.
  • The course did not do well in some academic terms due to some extended holidays.
  • In cases of other situations where the course is interrupted

Tuition and Fees Deduction

A student’s eligibility for claiming tuition and fees deduction depends on the modified adjusted gross income (MAGI) and filing status. The deductions on tuition credit are as follows:

  • A student is eligible to CA$4000 deductions if MAGI is less than CA$65,000 as a single filer and less than CA$130,000 as a married joint filer.
  • If a student’s MAGI is between CA$65,000 and CA$80,000 as a single filer and between CA$130,000 and CA$160,000 as a married joint filer, such a student is entitled to receive CA$2000 tax deductions.
  • However, if a student’s MAGI is over CA$80,000 as a single filer and more than CA$160,000 as a married filer, such student is not eligible for deductions.

Calculating and Filing Tuition Tax Credit

You can calculate tuition tax credit by multiply the whole amount of tuition paid by the federal tax credit rate for the federal tax credit. Currently, the federal tax credit rate is 15%.

Students living where a provincial tuition tax credit is available can calculate their deductions by multiplying their total tuition paid by the provincial tax credit rate. Generally, the provincial tax credit rate ranges from 4% to 15%.

Students can use the following Tuition fee forms to file their tax credit in Canada:

  • Form T2202 – this is the certificate for fees paid to any institution. The authority officer’s signature is not necessary for this form.
  • Form TL11B – it is a certificate if the fees are paid to a school or club.
  • Schedule 11 – used for transferring unused tuition credit to eligible relatives,
  • Form T2202 and schedule 11 – to designate an individual receiving the transfer and the amount of the transfer. Note that parents and grandparents cannot be appointed receivers if a student’s spouse or common-law partner claims an amount on their behalf on line 30300 or 32600 of their return.
  • Line 32400 – to decide which parent/grandparent will claim the transferred amount of their tax return.
  • Line 36000 of Schedule 2 – used for transferring eligible amounts from student to spouse

Conclusion

A tuition tax credit is one of Canada’s federal schemes designed to aid students financially. This program comes in the form of a non-refundable tax reduction that allows eligible students to use their tax credit to cover their educational expenses.

One of the most fantastic perks of this program is that any unused amount can be transferred according to the student’s wish to whom they choose. The forms mentioned above will aid you in understanding the exact form that suits your situation.

You can always contact your university if you have any inquiries about the eligibility criteria, documents, and other relevant questions on the tuition tax credit. Note that once you claim the tuition credit, it is advisable to retain a copy of the certificate issued by the educational institute.

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