If your child is studying abroad, he may have to file taxes differently than if he were studying in Canada. To help support your child, it’s important to know what the Canada Revenue Agency expects.
Using Registered Education Savings Accounts Overseas
If your child has a Registered Education Savings Account, he or she can withdraw money from that account to pay tuition and fees for universities outside of Canada. The student must be enrolled in a course that is at least 13 consecutive weeks, although there are exceptions that allow for enrollment in some university programs that are a minimum of 3 weeks. All the while, the student must be considered to be a resident of Canada.
For example, if you reside in Canada but your child attends university in another country, your child is likely still considered a resident of Canada based on your residency. However, if you have established residency in another country and your child has significant ties (property, business, marriage, etc) to the country in which he is studying, he may not be considered a resident and cannot withdraw from the RESP.
As a resident of Canada, your child is required to file a tax return even if he studies abroad. Your child must declare income earned as well as scholarships and grants that exceed his tuition and fees. Your child must also report education assistance payments. An EAP is a withdrawal from an RESP that exceeds its contribution. EAPs include interest as well as government matching grants and learning bonds.
Your child can also claim deductions for tuition and fees as well as education and textbook amounts. If your child does not have much income to declare, he likely does not need all of these amounts. In this case, the CRA allows your child to transfer the education amount to you. He may transfer up to $5,000 minus the amount he claimed.
Understanding Student Loans and Interest Deductions
Your child may apply for student loans with the Canada Student Loan and Grant application form, even to study abroad. This form and its guidelines are housed on the student financial website of each territory or province.
Once your child begins to repay his loans, the interest is tax deductible. The CRA only offers this deduction to Canadian student loans. As such, if your child is paying interest on a foreign student loan, the interest may not be tax deductible.
Authorizing a Representative on My Account
While studying abroad, your child may need assistance navigating his taxes and financial matters. If your child uses My Account, the CRA’s online portal with information about refunds, benefits, deductions, and more, he can authorize you to be his representative while he is abroad.
To add or cancel a representative, use the Authorize My Representative service on My Account, or have your child fill out Form T1013 and send it to the CRA.