If your child is pursuing a post-secondary education, you may be able to deduct their tuition from your taxes. This often arises because your child doesn’t have enough taxable income to claim the full tuition credit in the current tax year. The good news is the credit won’t go to waste – your child can elect to transfer the unused amount to you to reduce your tax bill.
Non-refundable Tax Credit
Similar to the basic personal amount, the tuition deduction is a non-refundable tax credit. A non-refundable tax credit reduces the amount of taxes payable to the government. While a refundable tax credit can generate a tax refund, a non-refundable tax credit can only reduce your taxes payable to zero. In most cases, the unused portion of the non-refundable tax credit is forfeited, but in some cases (like the tuition deduction), it can be transferred to a parent, grandparent, spouse or common-law partner. For the student, it often makes sense to transfer the tuition deduction to someone who has sufficient income to make full use of the tax credit.
If your child is at least 17 years old and enrolled in a qualifying college, university or educational institution, they should be eligible for the tuition credit. Your child’s college or university should then issue a T2202A tax slip for the number of months they attended college or university. It’s important to remind your child to obtain a copy of the T2202A/T2202A slip, as colleges and universities often require students to download and print a copy.
Why Transfer the Tuition Deduction?
Your adult child may wonder why they should transfer their tuition deduction when they can carry it forward to a future year. Although there’s no requirement for your child to transfer the tuition deduction to you, there are reasons why transferring it can make sense. “If you’re allowing your adult child to live rent-free while attending college or university, it can be a good way to help offset the cost,” says James Collins, a chartered professional accountant in Toronto, Ontario. “Furthermore, it may be several years until your child graduates from college or university and is able to fully use the deduction.”
Deducting the Tuition Amount
Claiming the tuition credit from your child is a two-step process. The first step is for your child to claim the tuition amount by completing federal Schedule 11 and the corresponding provincial schedule. The tuition credit is applied to reduce any taxes payable by your child to zero.
As mentioned, your child has two options: They can transfer the unused portion of their tuition credit or carry it forward. If they choose to transfer the credit, they can transfer up to $5,000 less the amount used to reduce tax owing. So if they reduced their tax by $1,000, the most that can be transferred is $4,000. They can also transfer the tuition amount to their parent, grandparent, or spouse or common-law partner. If the student, however, is claimed as a dependant by their spouse on line 303 or 306, parents or grandparents are not eligible to receive a tuition transfer (nor are the spouse’s parents or grandparents); instead, it must be transferred to the student’s spouse.
When you’re both doing your taxes with TurboTax, claiming the transferred amount is easy. After your child completes Schedule 11, consider asking them to provide you with the left over amount. You (the parent) or grandparents can claim the left over amount on Schedule 1. Meanwhile, if your child has a spouse or common-law partner with sufficient income to make use of the credit, that person can claim it on Schedule 2.
References & Resources
- James Collins, Chartered Professional Accountant; Toronto, Ontario
- Canada Revenue Agency: Transferring and Carrying Forward Amounts
- Canada Revenue Agency: Line 324 – Tuition, Education and Textbook Amounts
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