There are many scholarships and financial rewards available to help offset the rising cost of post-secondary education. Before 2005, students had to claim all scholarship money as taxable income on their income tax returns. However, that all changed in 2006 when all of the Canadian provinces and territories (except for Quebec) made scholarships and financial rewards non-taxable when received for a post-secondary program.
Scholarship Exemption for Full-Time Students
Students who enroll full-time and are entitled to the tuition deduction are not required to claim scholarship money as taxable income, except when related to employers and businesses.
The following qualify for the scholarship exemption and are considered non-taxable:
- scholarships
- awards
- bursaries
- fellowships
The scholarship exemption only applies when it is directly related to the full-time program in which the student is enrolled. The program length, conditions and terms of the scholarship, and the length of time of the financial award are considered when deciding whether a scholarship is tax-exempt.
For example, if you have enrolled full-time in a four-year business management program at a university and receive a scholarship of $3,000, you do not include it as taxable income on Line 13000 if you meet all of the requirements for the scholarship exemption.
Be careful when filing your income tax return. You must determine whether it is appropriate to include any scholarship amount that you have received.
Scholarship amounts appear in Box 105 of the T4A tax slip issued by the college or university which you have attended.
For example, assume that you receive your T4A slip from your university with an amount of $1,500 in box 130.
- If you qualify for the tuition amount, and you are a full-time student, you do not have to include the scholarship amount on line 13010 of your tax return in most cases.
- However, if you are not entitled to the tuition amount, you must report the amount that is greater than $500 on line 13010 of your tax return. In this example, you would have to report $1,000.
Scholarship Exemption for Part-Time Students
For students who claim the part-time tuition deduction, the scholarship exemption only applies for your tuition and other school-related expenses, such as textbooks and school supplies. The Canada Revenue Agency has a chart to help you determine the amount of income to include on line 13010 of your tax return. Use $500 or the calculated amount of scholarship exemption, whichever amount is lower.
Completing Your Tax Return
It may seem confusing as to what you should and should not claim as taxable income when it comes to the scholarship exemption, but tax software like TurboTax can help with this confusion. As well as the T4A tax slip, you should also receive a T2202 – Education and Tuition Amounts Certificate from the post-secondary institution. (Many institutions provide electronic slips online rather than sending them in the mail. Use your student ID and password to download this slip directly from your educational institution.)
It’s important that you enter the information from both slips in the correct boxes in the software in order for the scholarship income to be exempted. When completing the T4A screen, you are presented with a choice of boxes to enter the amount from Box 105 into. You’ll need to choose the correct box that describes your situation and enter the corresponding T2202 slip to get the exemption.
More information on how to complete your tax return and enter your scholarship income can be found in this TurboTax FAQ: Do I have to report scholarships and other academic awards on my return?
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