Understanding the Co-op Education Tax Credits and Other Canadian Student Hiring Incentives

Running a business often means juggling many responsibilities, including staffing up. But when you're a small business owner, hiring full-time employees can get expensive.

Some good news: There may be a cost-effective option—hiring students. Not only can they provide the help you need while gaining valuable experience to jumpstart their careers, but your business may also qualify for a hiring tax credit.

This article talks about co-op student tax credits and other student hiring incentives that could benefit your business—and help it thrive. Here's what they're all about.

The differences between an intern, a co-op student, and a recent grad

Interns, co-op students, and recent graduates each bring different levels of experience and expectations. Knowing what sets them apart can help you choose the best fit for your business needs and determine the various tax implications.

• Interns: These types of workers might not be part of a formal program, and their internship could be paid or unpaid. An internship is a short-term job designed to give career-goers work experience in a specific industry. For instance, if your business is in Ontario and hires a paid student intern, you could be eligible for the Ontario co-operative education tax credit.

• Co-op students: Co-op students are enrolled in a post-secondary co-op program that combines studying with work experience in their field for a set period. These jobs usually count toward their academic credit. Businesses that hire students enrolled in co-op programs at Canadian colleges and universities may be eligible for tax credits.
• Recent graduates: These students have completed their post-secondary education and are looking for full-time work with a focus on building a long-term career. If you offer work placements for post-secondary students, you might qualify for a wage subsidy through Canada’s Student Work Placement Program (SWPP).

How student hiring incentives work

These government incentives reduce hiring costs and help businesses access skilled, tech-savvy young workers, especially in areas like digital marketing and social media. The SWPP program, for example, offers wage subsidies for employers hiring post-secondary students, particularly in STEM fields. If your business qualifies, you could be eligible to offset up to 70% of student wages up to a maximum of $7,000 for each eligible student.

Ways a student can help your business

Hiring students is a win-win. Not only can they bring valuable skills and a fresh perspective to your team, but they can also benefit from gaining real-world, hands-on experience. Students can ease your administrative load by taking on tasks like organizing files, scheduling appointments, and responding to emails.

Plus, today's students can be more computer-savvy and often well-versed in social media and digital tech. Their expertise can give your business a competitive edge by helping navigate more advanced software, improve your online presence, and stay ahead of digital trends that are important to your business.

What you need to know about hiring students

Each province has its own rules. But, generally, businesses can’t discriminate against students based on age, require excessive unpaid work, or violate school-hour restrictions. Employers also have to provide supervision when necessary, offer extra training for students who have never worked before, and ensure they understand the company’s policies and procedures.

Yes. Students are protected by employment laws just like any other worker. That means they must be paid at least the minimum wage set by their province or territory—unless a government initiative, like a co-op or internship, helps cover their wages. They’re also entitled to reasonable hours and a safe environment.

Everyone, even students, must report any taxable income, including wages and other sources such as interest, investment income, and scholarships. However, student loans are not considered taxable income.

How co-op education tax credits work

In Canada, both federal and provincial governments offer programs that provide financial support to businesses hiring students. These include wage subsidies for summer positions and funding for hiring graduate and postdoctoral students for research projects.

Co-op education tax credits, like Ontario’s Co-operative Education Tax Credit and BC's Co-op Tax Credit, offer refundable tax breaks for businesses hiring students in co-op programs. You must hire students from recognized and approved co-op programs, and the placement must involve actual paid work (not just observation).

And, if you have a family business and are eligible, you can hire your own child if they qualify for internships, co-op placements, or graduate work—you get the tax incentives, and they get the experience. (There are also other, long-term tax benefits to hiring your children to work for your business.)

Understanding the Ontario Co-operative Education Tax Credit

The Ontario Co-op Education Tax Credit offers businesses a refundable tax credit of 25-30% of a student’s wages, up to a maximum of $3,000 per work placement.

Wondering if your business qualifies to hire students? If you're in Ontario, eligible employers include any business with a permanent establishment in the province that pays Ontario corporate income tax or personal income tax.

How the Ontario Co-op Education Tax Credit is calculated

To calculate the Ontario Co-op Education Tax Credit, businesses can claim 25-30% of the wages they pay to eligible students. For most students, businesses can claim 25% of the student’s wage, but if a student belongs to an underrepresented group, this increases to 30%.

For example, if a student earns $10,000 during the co-op term and qualifies for the full 30%, the business would be eligible for the maximum of $3,000. If they qualify for 25%, the claim would be $2,500.

How to claim the Ontario Co-op Education Tax Credit

To claim the Ontario Co-op Education Tax Credit, businesses must file Form T2 - Schedule 101 for corporations or Form T1 for individuals with their income tax return. You’ll also need to submit the Co-op Education Tax Credit application form.

Like all co-op tax credit programs, both you (as the employer) and the school must monitor the student's performance during the placement. You’ll also need to provide the student’s payroll records, a copy of the co-op agreement, and confirmation from the school about the placement.

All about the Canada Summer Jobs program

The Canada Summer Jobs wage subsidy helps employers across Canada hire students for summer jobs. This annual program through the federal government provides up to 50-100% in wage subsidies to encourage employers (not-for-profits, public sector, and small businesses with 50 or fewer employees) to hire youth aged 15-30 for summer positions. It helps young people gain work experience as well as businesses with staffing costs.

Get all the hiring tax credits you can for your small business

Hiring students is a great way to get the support you need for your business while staying within budget. You can maximize the benefits by taking advantage of government programs and tax credits and keeping your paperwork organized.

With a little planning and the right training, students can be a valuable asset, saving you time and resources —and even helping your business grow.

Running your own business can be stressful. Some tax credits can offer a little relief.

TurboTax has tax experts who can help you navigate some of these programs.

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