The cost of post-secondary education represents a financial burden to many Canadian students and their families. Tuition itself comprises a big portion of a student’s costs, and qualifying students can claim the Tuition Tax Credit. This Non-Refundable Tax Credit is used to offset part of the expense of college or university by reducing any tax the student may have payable.
Eligibility for Tuition Credit
Generally, any student over the age of 16 who is enrolled in post-secondary level courses at a Designated Educational Institution in Canada can claim the tuition credit. Students continuing education after high school are typically eligible. Schools outside Canada qualify if the time abroad is full-time study lasting at least three weeks.
If a student’s employer pays or reimburses tuition, the student is not eligible to claim the credit unless the employer includes the tuition amount in the student’s earnings. This is also true if an employer pays tuition to a parent on a student’s behalf.
An eligible course load must be post-secondary in nature or a trades school can qualify as well. For example, if a student attends university, but takes high school equivalency courses to prepare for later post-secondary courses, the student may not be eligible to claim tuition on the equivalency courses.
Calculating and Claiming Tuition Tax Credits
As a non-refundable credit, if the tuition amount is greater than the tax owed, the non-refundable credit can only be used to reduce or eliminate the student’s federal/provincial tax bill but won’t generate a refund. If you aren’t able to use the full amount of the credit, any unused credits can be carried forward to a future tax year, or transferred to a spouse/common-law partner or parent/grandparent.
Tuition Credit Documents
Colleges, universities and other accredited education institutions issue a T2202 – Education & Textbook Amounts Certificate to certify that a student took eligible courses of suitable duration to qualify for the tuition tax credit.
A student who is entitled to the disability credit and is enrolled in a qualifying educational program on a part-time basis is entitled to receive the credit as though he/she were a full-time student by submitting a certified letter from a medical practitioner about the student’s mental and physical impairment. Only the student completes Schedule 11, which calculates tuition.
Education and textbook tax credits that were eliminated on January 1st, 2017 can still be carried forward and claimed when needed.
Transferring Unused Credit Amounts
Unused tuition credits calculated on Schedule 11 can be transferred to qualifying relatives. Spouses and common-law partners, parents and grandparents — including those of your spouse or partner — can be designated for all or part of the transferred amount.
The student must designate the individual receiving the transfer and the amount of the transfer. This can be done with form T2202 and Schedule 11. Parents and grandparents are not allowed as transfer recipients if your spouse or partner claims an amount for you on lines 30300 or 32600 on her return.
If parents or grandparents are eligible for the transfer, decide which parent or grandparent will claim the transferred amount on line 32400 of their tax return. Enter transfers from student to spouse in field 36000 of Schedule 2, which calculates the amounts eligible for transfer between spouses. Please note that you can only transfer current year tuition (up to $5K). Prior year’s tuition can only be carried forward.
Using Carry Forward Amounts
The amounts of unused credit are applied to reduce tax payable automatically. The Canada Revenue Agency (CRA) applies the available tuition amount carried forward every year to reduce your taxes to zero until it has all been used.
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Peky is a Tax Analyst at TurboTax Canada. Previous to Intuit, she’s worked at Canada Revenue Agency interpreting tax law and has even clerked at Tax Court of Canada. Peky currently works on updating TurboTax Canada’s products year-to-year. She could also be seen helping TurboTax customers with tax questions during Lifeline. For Peky, getting timely and accurate information out to customers to help them is paramount.