Post-secondary students often need support from their families while pursuing higher education degrees or professional licenses. What you may not know is that, as a parent, there are ways you can assist beyond simply paying the bills. And, one of those ways is managing your student’s taxes.
If your child is attending university, they can designate you as a representative for tax purposes; and you or family members can even benefit from tax savings generated by the student. The key is understanding the credits, forms, and procedures common to student tax returns so you can plan how best to file on your student’s behalf.
There are rules and tax credits to consider throughout the process, though. So we’re here to walk you through it.
- Your child can authorize you to handle their tax matters while attending university if they have a CRA My Account and activate you as a representative.
- A form called Schedule 11 details the federal tuition tax credit, including prior unused tuition; education and textbook amounts; amounts available to transfer; and unused amounts to carry forward to a future year.
- Though you cannot claim the interest you pay on your child’s student loan, the amount reported on Schedule 11 for tuition may be eligible to you as a parent or carried forward by your child.
How to become a tax representative for your student
You can take care of all tax matters while your child is in college by becoming an authorized representative with the Canada Revenue Agency (CRA). Your child just needs to set up a CRA My Account and activate you by using the “Authorize My Representative” service on the My Account web page.
You can also request to be an authorized tax representative for someone. Once you are authorized by that person, this consent stays in place until the student changes it or it reaches a chosen expiry date. You can, for example, set up authorization once to cover the entire time your child will be in college.
How to report income on your student’s return
Income reporting rules for students aren’t all that different from those for an average taxpayer. Income from employment, tips, and investments are all declared on the student’s tax return. Some income sources unique to a student must also be reported. These may include:
- Payments from a registered education savings plan (RESP)
- Some scholarships and bursaries
- Fellowships
- Study grants, including artists’ project grants, apprenticeship grants, and research grants
Depending on the enrolment status (full-time/part-time or undergraduate/graduate/post-graduate) many scholarships and bursaries are exempt from income tax. This also applies to government benefit programs, such as the goods and services tax/harmonized sales tax (GST/HST) credit and Canada child benefit (CCB) payments and provincial counterparts.
Gifts and inheritances are usually tax-free and not reported on your student’s tax return.
How to declare tuition tax credits and other university expenses
The tuition tax credit is a non-refundable tax credit available to post-secondary students. This means that if you or your student pay for tuition and other educational costs (under certain conditions), you can let the CRA know when you’re filing your child’s taxes and they’ll lower the tax bill.
So how do you let the CRA know about your child’s tuition expenses? The university issues your student the T2202 – Tuition and Enrolment Certificate that shows the tuition fees that are eligible to be claimed on your tax return. This information is then used to complete the Schedule 11 – Federal Tuition, Education, and Textbook Amounts and Canada Training Credit form. The schedule 11 assists you in calculating student tax credits that you can report on line 32300 of your student’s tax return. You can also determine tuition, education, and textbook amounts; the amount your child can transfer to a family member; and any unused portion they may be able to carry forward to a future year.
(Take note that federal education and textbook tax credits were eliminated in 2017. However, you can check the student tax credits available in your province.)
Understanding the student loan interest tax credit
The student loan interest tax credit program is a non-refundable tax credit that helps offset the cost of paying for student loans. Only the student can claim the interest amount on a student loan, regardless of who paid the interest. The interest payments made on federal and provincial student loans will be eligible for a 15% tax credit. If the student doesn’t need to claim the interest to reduce tax payable to zero, this amount can carry forward up to five years.
The only loans for which interest can be claimed are those received under terms of the Canada Student Loans Act, the Canada Student Financial Assistance Act, or provincial and territorial student loans that the federal government does not administer.
One thing thing you can give a sigh of relief about—as of April 1, 2023, the federal government stopped charging interest on student loans—although your student is still responsible for paying any interest that accrued before April 1, 2023.
When you file your student’s tax return, you can claim this credit by entering the amount of interest paid in the last year on line 31900. You can also claim their corresponding provincial or territorial credits on line 58520 on form 428.
How to transfer deductions and credits
Though you cannot claim the interest you pay on your child’s student loan, the amount reported on Schedule 11 for tuition may be eligible to you as a deduction if it is not fully used or carried forward by your child. The amount eligible for transfer is limited to $5,000 annually, but this is reduced by the amount claimed on your student’s return to reduce taxes.
For example, if your child has $7,000 in eligible credits but used $1,000 to reduce taxes to zero, you are still only allowed to receive a transfer of $4,000 from the balance of the credits.
Don’t neglect to carry forward
Students typically pay little federal tax while in school, so if there is already no tax owed in a year, adding the student loan interest credit will have no effect. But be sure to advise your child to retain the statements of interest paid that they receive annually from their lending institution so they can claim it in later years when the tax credit can reduce their federal tax at a time they’re earning sufficient income.
Don’t forget to refer to the prior year’s notice of assessment (NOA), which declares surpluses transferred or carried forward so you can keep track. This form also stays with the student’s return. It is not forwarded with a transferred amount.
If you are filing electronically, the “Auto-Fill My Return” feature within your student’s My Account populates the carry forward amount on your return. It will also carry forward if you’re using TurboTax software.
Consider relocation expenses
While any taxpayer can claim moving expenses if eligible, this deduction also typically fits the student lifestyle if your child moved away, such as to another city, to pursue studies full-time.
The moving expenses amount can only be deducted from the total income—scholarships, fellowships, bursaries, certain prizes, and research grants portion of your child’s return—in order to then calculate their taxable income.
Tax lessons that keep on giving
While it may add yet another thing to your to-do list, handling your student’s tax returns could pay off for them and for you—in the short and long term. Not only could your family reap some tax benefits, but you’ll be helping your student learn smart tax strategies for the future.
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