School tax: What can you claim as a deduction on your annual income tax?

The tuition tax credit

Claim the tuition credit to receive a non-refundable credit worth 15% of your tuition claim on the federal portion of your taxes. Provincial tax returns each have their own rules surrounding this claim for a combined benefit that’s bigger, depending on where you live. British Columbia (5.06%), Nunavut (4%), Northwest Territories (5.9%), Nova Scotia (8.79%), Newfoundland and Labrador (8.7%) and Prince Edward Island (9.8%) also have an education amount for you to claim.

Tuition fee transfer to parents and supporters

If you don’t need the credit to bring your non-refundable credits up to the same level as your taxable income, thereby reducing your taxes to zero, the unused tuition amount may be transferred (at least in part) to your spouse or other supporting individual up to a maximum of $5,000. If you don’t have anyone to transfer the tuition to (or wish not to transfer), the unused tuition may be carried forward to be used in a future year. The bottom line is that you’ll get a credit for about 25% of your tuition, depending on your province of residence, but you will only benefit from this non-refundable tax credit if you have taxable income.

What is the Canada Training Credit?

The Canada Training Credit allows for a tax credit for tuition or other fees paid to an eligible university, college or other certified post-secondary level educational institution in Canada, providing courses for an occupational, trade or professional examination. If you have both tuition fees and are eligible for a Canada Training Credit, you can claim a refundable credit for the lesser of one-half of your tuition and your Canada Training Credit entitlement, plus you can claim a portion of your tuition fee credit if you need it. It’s important to always file a tax return to earn this notional credit, which increases each year by $250, to a lifetime maximum of $5,000. To claim the CTC you must be over 25 and under 66 and meet certain income requirements, described below:

How to use the disability supports deduction

Starting with the 2024 tax year, the disability supports deduction has been expanded to include new deductible expenditures. Students can claim this amount to offset taxable employment, self-employment, scholarships, fellowships, research grants or other qualifying income if they have a mental or physical impairment. The deduction cannot be shared with a supporting individual and the same expenses cannot be claimed for the medical expenses credit if they are claimed as a disability supports deduction.

There is a long list of qualifying expenses; here’s what’s new for 2024:

• For those with a severe and prolonged impairment in physical function, the costs of an ergonomic chair (as well as the costs of an assessment), bed positioning devices (again, as well as the cost of an assessment) and a mobile computer cart
• For those with an impairment in physical or mental function, an alternative input device for computers and a digital pen device

Also claimable this year, a navigation device for those with vision impairment, and memory or organizational aids for those with memory impairment.

Other tax assistance students may claim

And there’s more that students and supporters can claim.

• Scholarship exemptions
  These exemptions come with varying criteria depending on whether you are a full-time or part-time student or have received an artist’s project grant.
• Research grants
  You can claim expenses paid to do research including travelling costs, the cost of an assistant or costs for certain equipment or lab fees. But the amounts can’t exceed the grant, for tax purposes. 
• Moving expenses
  Full-time students can claim moving expenses only if there is income at the new location from taxable scholarships, fellowships, bursaries, prizes and like income, employment or self-employment, and you move 40 kilometres or more closer to the educational institution.
• Child-care expenses
  This will reduce net income, which in turn can increase refundable tax credits, like the federal GST/HST credit, and the Canada Child Benefit, the Canada Workers Benefit (which can’t be claimed by full time students unless the student is a parent), and some provincial credits. But if the student is not taxable, the higher income earner, in the case of a couple, may qualify for a claim. Likewise, these expenses may reduce income to a level that enables a tuition transfer to a supporting person like a spouse.
• Medical Expenses
  There is a long list of qualifying expenses including service animals or tutoring services that can help students to support their studies (medical practitioner must provide verification). Other eligible costs include private insurance premiums, eyeglasses, contact lenses, prescriptions, the incremental costs of gluten-free food, and much more. Check it out and keep your receipts.

How are RESP withdrawals taxed?

Finally, those fortunate enough to have a registered education savings plan (RESP) can withdraw money from the plan to go to school. But the amounts are taxable to the student. Full-time students can now withdraw $8,000 during the first 13 consecutive weeks of enrolment; part-time students can withdraw $4,000 in that time. After this, there is no limit, unless the beneficiary takes a 12-month break from studies. In that case, the $8,000 limit is reinstated. Both full- and part-time students now may receive payments for up to six months after the end of their studies if the expenses would have qualified during the study period.

Are grants and student loans taxed in Canada?

There is more good news for students from low-income families. The federal government will increase Canada Student Grants to full-time students to $4,200 and $2,520 for part-time students in 2024.

In addition, interest-free Canada Student Loans will increase from $210 to $300 a week. But students should understand their commitments to repay the borrowed amounts when they are granted and budget for this when they start their careers later.  

Student loan forgiveness in Canada

The federal Canada Student Loan Forgiveness Program has been expanded to include more health-care and social services professionals who choose to work in remote and rural areas of Canada. Aside from doctors and nurses, the list now includes dentists, dental hygienists, pharmacists, midwives, teachers, social workers, personal support workers, physiotherapists and psychologists.

Saving taxes on student expenses

It is always important to be prompt about filing a tax return. That’s true for both parents and students. There are a couple of reasons why. 

First, many people miss optimizing the claim for tuition fees on their tax return. As you now know, these amounts can be transferred from student to a supporting individual—parent, grandparent or spouse—if the student is not taxable. Filing a tax return—or an adjustment to a prior filed return—can help you recover missed transfers and get some money back from the past. 

Plus filing a return will help students qualify for refundable credits like the GST/HST Credit and, in some provinces, the Canada Carbon Rebate—all extra money in your pocket! 

Filing a return is also the way to build RRSP room, even as a teenager, based on your part-time gigs as you save to go to school. An RRSP contribution down the line, when income is higher, can help to create a tuition-fee transfer to a supporting person and increase access to those lucrative refundable tax credits.  

Investing your own education or that of your children may be the best investment you can make. Taking advantage of tax benefits will improve your return on investment still more. 

More on student debt:

• RESPs 101: The RESP withdrawal rules
• How to apply for loans and grants for Canadian students
• 6 money-saving tips for post-secondary students
• The best student credit cards in Canada right now

About Evelyn Jacks, RWM, MFA, MFA-P, FDFS

Evelyn Jacks is the best-selling tax author of 55 books, an award-winning business leader and the Founder and President of Knowledge Bureau, an online financial education institute.

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