Students launching into a new school season face the upcoming year with both excitement and trepidation. In addition to their scholastic challenges, many students are dealing with financial and taxation issues for the first time. It’s important that students and their parents understand these new responsibilities and have a strategy to reduce costs and maximize credits.
What do students need to know about claiming tax credits related to tuition fees?
Cameron Johnston, CPA, CA, LPA and Partner at Millards Chartered Professional Accountants recommends that students and their parents start with diligence around keeping records and receipts to maximize their credits and deductions at tax time.
“The credit for tuition allows students to reduce their income taxes by taking into account eligible tuition fee amounts they paid. It’s important to document all expenses so that they can be considered later.”
Johnston recommends that students and their parent advisors have a basic understanding of how educational credits are applied.
“A common misconception is the taxation period. You can claim only the fees paid for courses you took in the calendar year, not the academic year. Also, to qualify, the fees you paid to each qualifying institution must be at least $100 for the year.”
So what fees qualify for the tuition fee deduction? Some basic eligible costs include admission fees, academic fees, examination fees or application fees.
“Other potential expenditures could come from extra charges for using library or laboratory facilities, charges for a certificate, diploma, or degree or mandatory computer service fees.”
Text books can be a major education expense, unfortunately, the actual cost of textbooks are not eligible for credit.
“Eligible fees also include the cost of any books that make up the total fees for a correspondence course taken through a post-secondary educational institution in Canada.”
While there are many tax credit opportunities for students, there are situations where you cannot claim costs.
“You cannot claim fees that were paid or reimbursed by your employer, or an employer of one of your parents, where the amount is not included in your or your parent’s income. You cannot claim student’s association fees, medical expenses, transportation, parking, meals and lodging.”
Also, students cannot claim goods of lasting value that you will keep, such as computers, microscopes, uniforms, or academic gowns.
What are the tax credit rules for students attending a university outside of Canada?
“If you were in full-time attendance at a university outside of Canada, for courses that are at least 3 consecutive weeks long that will lead to a degree at the bachelor level or higher, you can claim eligible tuition fees.”
Can tuition fees be deducted for students taking a course to improve their occupational skills?
“If you’re at least 16 years old by the end of the year and attended an educational institution in Canada certified by Employment and Social Development Canada to develop or improve occupational skills, then you can claim a credit for these tuition fees.”
In addition to the information on the Service Canada website, The Canadian Revenue Agency has created a series of videos designed to help students and their families understand when and if a student is required to file income tax. The video series explores student income tax in short segments on topics such as claiming moving expenses and child care deductions, claiming tuition fees, education and textbook amounts.
An accountant with Millards since 1990, Cameron Johnston provides audit and accounting services for clients in the public and nonprofit sectors, as well as small owner/manager businesses. He is a former member of the Practice Inspection Committee of the Institute of Chartered Accountants of Ontario and is the Treasurer for the BCI Alumni Foundation. He also serves as Treasurer for the James Hillier Foundation, an organization that provides scholarships for Brant County students pursuing post-secondary education in the field of science.