You might be asking, why are we talking about school right now, well, it is always applicable and people go to school, or back to school, at any time during the year thanks to online learning opportunities and multiple session times.
Whether you are thinking about upgrading your current skills or going in a completely different direction for a 2nd career, going back to school is a big thing, financially and emotionally.
If you’ve made the decision to do so, depending on what you are doing there could be some tax benefit for you.
What does going back to school have to do with taxes?
Quite a lot actually, so let’s discuss the different ways we can get a little financial support at tax time for upgrading our knowledge and skills (or for sending our kids off for the first time!). For more details on each item, click each title link for an in-depth explanation on our TT blog.
Tuition Tax Credits: The Federal non-refundable tax credit is still the number one that can benefit you quite a bit. Non-refundable tax credits help lower your taxes owing, after they’ve been calculated on your taxable income. The government allows us to claim 15% of our eligible credit amount, so if you have tuition credits this year or even carried forward from a previous year, they can help reduce that tax bill.
Transferred Tuition Tax Credits: If you don’t need your tuition credits this year, you can transfer a portion, up to $5,000 to your spouse/common-law partner or even your parents or grand-parent – share the wealth if you can! So if it wasn’t you going back to school but one of your kids off to university or college, don’t forget that those tax credits they are earning for tuition can be transferred to you, up to $5,000! When the kids don’t need it when they’re not earning, it is a big help to parents that are footing those hefty tuition payments.
Canada Training Credit: If you had to pay fees for courses or even for a trade or professional certification exam, those costs could qualify under the CTC. Each year, starting 2019, eligible individuals accumulate $250, to a $5,000 lifetime maximum, to be used as a non-refundable tax credit towards qualifying training or examination fees. Even though you might not be heading back to school for a full program, that upgrade program or certification examination could allow you to use this tax credit on your next tax return and help reduce those taxes owing.
Interest Paid on Student Loans: If you had to take out a student loan to cover your education costs, the interest you pay on those loans might qualify as a non-refundable tax credit on your tax return. You must have received the loan for post-secondary education under one of the three acts: Canada Student Loan Act, Canada Student Financial Assistance Act or the Apprentice Loans Act. Unlike tuition tax credits, interest on student loans cannot be transferred to anyone else, only you can claim this amount.
Lifelong Learning Plan: This plan allows eligible students to withdraw funds from their RRSPs in order to pay for their education costs, to a maximum of $10,000 per year for an overall limit of $20,000. These funds cannot be withdrawn for the purposes of paying for your child’s education, it is only for you or your spouse/common-law partner. If you over withdraw from your RRSPs for this plan, the excess above the limit will be income that you’ll have to report on your tax return.