Post-Secondary Education Expenses
Don’t forget your education expenses on your tax return.
Students enrolled at eligible Canadian post-secondary institutions, such as universities or certified trade schools, might be entitled to a tax credit for tuition fees and ancillary fees (e.g., library fees, lab fees, and computer service fees) paid for each calendar year. Full-time student fees at foreign universities might also qualify for a credit.
Certain examination and other related fees paid to an educational institution, professional association, provincial ministry, or similar institution to take an examination that is required to obtain professional status recognized by federal or provincial statute, or to be licensed or certified to practice a profession or trade in Canada may also be claimed.
Canadian students may claim tuition tax credits for tuition fees paid to foreign universities outside of Canada as long as the student is in full-time attendance, the course duration is a minimum of three consecutive weeks, and the course leads to a degree. This will recognize the shorter course lengths at some foreign educational institutions and allow Canadian students to claim the related tuition tax credits.
In addition to the tuition credit, students might be entitled to an education tax credit calculated on an education amount of $400 per month for each full or part month of full-time attendance, or $120 per month for each full or part month of part-time attendance. Education amounts for provincial tax credit purposes vary depending on the province. In B.C., the education amounts are $200 per month for full-time attendance and $60 per month for part-time attendance.
Students may also be able to take advantage of the federal textbook tax credit. The textbook tax credit is calculated on a prescribed amount of $65 per month for each month the student qualifies for the full-time education tax credit, and $20 per month for each month the student qualifies for the part-time education tax credit.
The education and textbook tax credits are available for 2015, but are expected to be repealed by the government for subsequent years.
You may be able to transfer a portion of your unused tuition, education, and textbook tax credits to a supporting spouse, parent, or grandparent up to maximum of $5,000 per person per year subject to certain restrictions. Tuition, education, and textbook amounts that cannot be used in the current year, and that are not transferred, can be carried forward and claimed by the student in a subsequent year.
If your employer or your parent’s employer paid your tuition, it is not creditable to you unless it is included in yours, or your parent’s income.
Students might also be eligible for tax credits or deductions for other expenses, such as interest on student loans or moving expenses.
The Canada Education Savings Grant
The government of Canada adds to your savings in a Registered Education Savings Plan (RESP) with the Canadian Education Savings Grant (CESG). The CESG is a financial incentive for parents, family, and friends to save for a child’s education after high school. The grant is paid directly into the child’s RESP and will not be included in the annual and lifetime contribution limits for the beneficiary. The lifetime limit for any one beneficiary is $7,200.
Lifetime RESP contributions are limited to $50,000 per beneficiary. When more than the $50,000 RESP lifetime limit is contributed with respect to a beneficiary, a 1% per month penalty will be payable on the excess contribution that is not withdrawn by the end of the month.
The government of Canada will contribute the Basic CESG grant equal to 20 per cent of the first $2,500 of annual contributions to an RESP (up to a maximum of $500 per year per beneficiary) for the benefit of children under 18 years of age. For missed years, there are carry-forward provisions that allow you to catch up on missed CESGs by up to $500 per year.
In 2015, for lower and middle income families, the additional CESG rate on the first $500 of annual contributions is 20 per cent for families with income of $44,701 or less (CESG equals $100 on the $500 of contributions), and 10 per cent for families with income between $44,702 and $89,401 (CESG equals $50 on the $500 of contributions).
If the beneficiary does not use the CESG for education, the principal amount of the CESG grants must be repaid to the government. You will not have to repay income earned on the CESG grants but the income will be taxed when the amounts are withdrawn.
The CESG will only be available for a 16 or 17 year old if the RESP contributions (net of any withdrawals) made before the year the child turned 16 either totaled $2,000 or were at least $100 per year in any four previous years. Subscribers of separate RESP plans for their children are allowed to transfer amounts between individual RESPs for siblings, without incurring penalties and without triggering the repayment of CESGs, provided that the beneficiary of the plan receiving the transfer of assets had not attained 21 years of age when the plan was opened. Set up and make contributions to an RESP for your children to qualify for the CESG.
Student Bursary and Scholarship Income
Scholarship, fellowship, or bursary income received by a student is considered fully tax-exempt, provided the income is connected with a program that entitles the student to claim the education tax credit. The education tax credit is available to students who are enrolled in qualifying post-secondary educational programs at designated educational institutions. Generally, to be considered at the post-secondary school level, a course should provide credit towards a degree, diploma or certificate.
Where the scholarship exemption applies to a student in a part-time program, the exemption applies only to the extent the award covers tuition fees and costs incurred for program-related materials. This limit does not apply to students entitled to the disability tax credit or students who cannot enroll full-time due to a mental or physical impairment.
Since 2007, the exemption has been extended to scholarships, fellowships, and bursaries received in connection with an elementary or secondary school educational program.
Scholarships from foreign universities may be considered taxable income to the student in that country even though the student may be considered a resident of Canada while attending the foreign university.
Deductions When You Move for School
If you moved in 2015 for to attend a university or other post-secondary educational institution, you may claim a tax deduction for certain moving expenses if your new residence is at least 40 kilometers closer to your educational institution than your former residence.
You may claim mover’s transportation costs, storage charges, insurance, personal transportation costs for you and your family, the costs of cancelling a lease at your former living location, and lodging and meals for up to 15 days near your former or new living location. If you sold your former residence, you can claim the costs of selling that residence including advertising costs, legal fees, real estate sales commissions, mortgage prepayment penalties and various other costs. If you sold a property at your former living location and acquired a property at your new living location you can deduct certain costs of the purchase such as property transfer taxes in connection with the purchase of your new residence. (This does not include GST or HST.)
The costs of automobile and meals incurred in the move may be the actual costs (within reason and subject to certain limits) or the Canada Revenue Agency flat rate costs. For an automobile, it can be the actual operating costs for the year prorated over the total mileage for the year relative to the mileage for the move. Alternatively, it can be based on the 2015 flat rate in British Columbia of $0.485 per km. For meals it can be the actual costs or the 2015 flat rate of $17 per person per meal up to a maximum of $51 per person per day.
Deductible moving expenses to study as a full-time student at a university or other post-secondary educational institution can only be deducted against income earned in the year from scholarships, fellowships, bursaries, certain prizes, and research grants that are included in income for tax purposes.
For more really useful tax tips, visit https://www.bccpa.ca/CpaBc/media/CPABC/News_Events_Publications/Publications/TaxTipsandRRSP/Tax-Tips-2015.pdf .
This post has been prepared for general information purposes. It is not advice. The information presented may not fit your unique situation, please consult one of our trusted business advisors at RHN CPA for further clarification and interpretation of your circumstances.