Now that college and university students have returned back to class this is on opportune time to review the various tax credits and deductions available to them. Not only will these credits assist the student but also their parents can benefit as well. First year post-secondary students should make themselves familiar with these tax advantages as they will prove to be very beneficial throughout their time at school and in some cases beyond.
There are three distinct tax credits available to post-secondary students to reduce their 2016 income tax. These include the tuition credit, the education amount and the textbook credit. All of the information related to these credits is reported on form T2202 issued to the student early each year-ensure you obtain this information slip as it verifies your credit eligibility as well it can be used to transfer credits to one’s parents.
The tuition credit is a non-refundable tax credit based on the actual tuition cost paid in the calendar year by the student. The credit has a value of 15% of the amount of those fees. The education amount is based upon the number of full time or part time months the student attended school. Similarly, this credit has a value of 15% on $400 per month for full time attendance and $120 a month for part time attendance. Finally, the textbook amount is based on a monthly amount if one is eligible for the education credit. It is important to note that if the student does not have enough income to use these credits that up to $5000 can be claimed by either the students spouse or supporting parent or grandparent. Unused credits can be carried forward by the student for use in future years when he\she has income to apply the credits against. The 2016 Federal budget has eliminated the education and textbook credits effective January 1, 2017 but the tuition rules remain unchanged.
Tax credits to assist the post-secondary student are not just limited to tuition costs. The HST credit which provides quarterly tax free payments is available to low income earners over the age of 19. One must file a tax return to obtain this benefit. Students who move at least 40 Kilometers to attend post-secondary studies can deduct moving expenses against earned income. As well the student can also claim moving costs if he\she moves a similar distance from school to a summer job.
Finally, if a student pays interest on a student loan received under the Canada Student Loan program or any Provincial assistance program the cost will be eligible for a non-refundable tax credit. Interest paid by a student on student lines of credit loans provided by banks or other financial institutions do not qualify for the credit.
CRA periodically asks individuals to substantiate the claims for these credits so be sure to keep the related documentation in the event that such a request is made.