Last chance to claim education and textbook credits.
Are you a post-secondary student? Do you have a child in university or college? Then you’ll want to know how the 2016 Federal Budget new rules will affect your tax situation next year. The education and textbook credits are slated to be eliminated as of January 1, 2017. The change doesn’t affect your 2016 tax return, but here’s what you need need to note going forward.
What are education and textbook credits?
In addition to the actual amount of tuition paid for post-secondary studies, students (and parents/spouses by way of transfer) have been allowed to claim additional credits based upon the number of months they attended college or university during the tax year. Both full-time and part-time studies are eligible as long as certain conditions are met. The university/college indicates the number of months to claim on the T2202A slip along with the eligible tuition amount.
Beginning January 1, 2017, education and textbook credits will sadly both end. Any prior unused amounts will still be available for future years until they have been depleted. Only the student may claim these carried-forward amounts – not parents, grandparents, or spouses.
How does this change affect my 2016 return?
If you’re a student, this change doesn’t affect your return. However, if you are a parent, you may consider a transfer this year when your child still has these extra credits. You may not be able to perform a transfer in coming years depending on your child’s income, especially if your child’s tuition isn’t overly high.
Imagine your son attends community college full-time. The tuition is $2,000/semester. This year, his total for tuition, education, and textbook credits would be $7,720 ($4,000 for tuition plus $3,720 for education/textbook credits). If his tax situation means he doesn’t need any of these credits, he could transfer up to $5,000 to you at tax time.
If everything remains the same next year, he’ll only have the $4,000 in tuition available for transfer. If his income increases next year, that amount may further decrease.
If your spouse is the student, the same applies. If you haven’t done a transfer in past years, consider it for 2016.
Other indirect changes:
- If you’ve factored in education/textbook credits when you filled out your TD1, be sure to update the form. Your TD1 is the form filled out for payroll that ensures the proper amount of tax is deducted from your salary. Similarly, if you are self-employed, factor in a smaller credit next year when setting up instalments.
- The elimination of the federal education/textbook credits does not affect its provincial counterparts – at least not yet. Any changes to these credits in the future will be made by each province individually.
- Other rules, such as the scholarship/bursary income exemption, are based on qualifying for the education amount. Although the education amount is disappearing next year, the qualifications will remain the same – just the phrase “education amount” will be removed.