Do Co-op Students Pay More Tax?

What’s a co-op program?

Co-op programs are partnerships between a Canadian employer and a college or university. They allow students to acquire real-life work experience, make money, and earn academic credits at the same time.

Educational departments with co-op programs typically work with a list of employers that have a history of offering student internships during the school year, including the summer term. To help boost that list of employers, the Co-operative Education Tax Credit (CETC) has been put in place to help incentivize Ontario corporations to offer co-op placements to qualifying students in that province. The refundable credit is equal to 25% to 30% of the eligible expenditures for a qualifying work placement (to maximum of $3,000). Most placements last 4 months, or 16 weeks of full-time employment. But lengths can vary.

Students who meet their program's eligibility requirements, such as being a full-time student enroled in an accredited program, may be invited to apply for available positions. Selected candidates will then be asked to do an interview.

If the interview is a success, congratulations! You got the co-op placement. You’ll take a break from your coursework for a semester, live your life as a gainfully employed (tax-paying!) Canadian, and earn academic credits at the same time. Many co-op students go on to make valuable connections during these placements, which can help them secure permanent employment after graduation.

How much tax do students pay in Canada?

Co-op students are taxed the same as any other Canadian worker. That’s because in Canada, employment income tax is based on a progressive tax system made up of tax brackets. Canadians can also deduct a basic personal amount (BPA), which helps ensure that all Canadians can earn up to a minimum income threshold before they start paying tax. In 2025, the maximum federal BPA is $15,705.

Here’s an overview of Canada’s federal tax brackets for 2025:

*The lowest federal tax rate fell from 15% to 14% in July 2025 as a result of Prime Minister Mark Carney’s middle-class tax cut, leading to an average federal tax rate of 14.5% in 2025.

Canadians also pay provincial/territorial taxes based on the province or territory in which they live. For example, if you earn $25,000 from your co-op internship in Ontario, your taxable income (total income minus BPA) will be taxed at the current federal tax rate of 14% and Ontario’s provincial tax rate of 5.05%. These rates can help you calculate the tax you’ll pay on your co-op income: 

Federal taxable income. $25,000 - $15,705 (federal BPA in 2025) = $9,295

Provincial taxable income. $25,000 - $12,399 (Ontario BPA in 2024 and 2025) = $12,601

Federal income tax. $9,295 x 0.14 = $1,301.30

Provincial income tax. $12,601 x 0.0505% = $636.35

$1,301.30 (federal) + $636.35 (provincial) = $1,937.65

In short, a student who earns $25,000 in 2025 can expect to pay $1,937.65 in federal and provincial income taxes.

The full list of provincial and territorial tax rates is available on the CRA’s website. 

How are student income taxes calculated?

If math isn’t your best subject, don’t worry. You don’t have to do these calculations yourself. Your taxes will automatically be deducted from your paycheque along with contributions to Employment Insurance (EI) and the Canada Pension Plan (CPP) (Quebec residents pay into the Quebec Pension Plan, also known as QPP).

That said, you can expect the paycheques you get from your co-op placement to be a bit lower than in the example shown above. That’s because payroll taxes are based on your average annual income. So even if you only work part of the year, your payroll taxes are likely to be deducted as if you were working full-time all year, skewing the basic personal amount used to calculate the income tax withheld from your paycheques. Luckily, you can get this money back when you file your tax return.

That’s why it’s so important to file a Canadian income tax return. It’s the final quality control that allows you to make sure everything is reported accurately so you can recoup any overpayments you made during the tax year.

Filing a tax return also provides you with an opportunity to:

• Add your name to the Elections Canada voting list if you're eligible to vote in Canada

• Apply to receive benefits such as the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit—a non-taxable payment made 4 times a year to Canadian residents with low and modest incomes—or the Quebec Solidarity Tax Credit (a similar provincial credit).

• Update your address, phone number, or marital status with the Canada Revenue Service (CRA)

• Deduct eligible home office expenses (if you work from home)

• Claim medical expenses

• Claim tuition fees and student loan interest (if applicable)

Tips for foreign students

Typically, all foreign students who earn Canadian income are required to file taxes in Canada. That's because the requirement to pay taxes is based on residency—or where you lived on December 31 of the taxation year.

Some countries have specific tax treaties with Canada to help international students avoid double taxation. For example, you might be required to pay tax on the income you earned in Canada, but any money you receive from your home country (such as grants, scholarships, and family support) likely won’t be taxed by the CRA when you file. Similarly, many Canadian tax treaties ensure the income you earn in Canada won’t be taxed a second time if you also file a tax return back home.

Check out Canada’s list of foreign tax treaties to find out if you're home country has an agreement with Canada.

What do you need to file your taxes in Canada?

Filing your taxes is pretty straightforward, especially if you only had one employer during the year. The information you’ll need to file will be included on 3 main documents: your T4-slip, your T2202 certificate, and form T2200: Declaration of Conditions of Employment (if you were required to work from home).

You can expect to receive these documents from your school or employer before the end of February, either through the mail, online, or in person.

What’s a T4-slip?

Also known as a Statement of Remuneration Paid, the T4 slip is a tax document that presents a summary of the income you earned from your employer, along with the amounts that were withheld for taxes and programs like the CPP.

Quebec residents will receive an additional slip, known as the RL-1. Similar to the T4 slip, it includes contributions to government programs that are specific to Quebec, such as the QPP and the Quebec Parental Insurance Plan (QPIP).

What’s a T2202 certificate?

If you paid tuition during the year, your college or university will issue a T2202, also known as a Tuition and Enrolment Certificate.

This slip allows you to deduct your tuition payments to reduce the income tax you owe for the current tax year. You can also carry these tuition credits over to a future year when your income is higher and you find yourself in a higher tax bracket. The CRA's My Account service keeps track of this for you, so make you enroll if you haven’t done so already.

What's a T2200?

The T2200, also known as a Declaration of Conditions of Employment, is a tax slip you can get from your employer if you were required to work from home during the year. It allows you to claim home office expenses, such as a portion of your rent and utility bills, travel expenses, and office supplies. 

Joining your school's co-op program should be a no-brainer

If you’re pursuing post-secondary studies in a field that offers co-op placements, taking advantage of these programs can be a good choice. Especially since they provide an opportunity to graduate with work experience and earn money to pay for school.

In addition, while students are subject to the same tax rates and laws as other Canadian workers, many students can reduce their income taxes to almost nothing. This is even more likely if 100% of their income is within the lowest tax bracket. In some cases, filing student taxes can even yield a tax return.

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