Students! Get Ahead with these Government Tax Breaks

  • post secondary students and financial assistance

Even though tax season is still 8 months away, it is never too early to start thinking about taxes.  It may be far from the minds of most Canadians, let alone post-secondary students who just started the new school year.  However, planning early can help post-secondary students take full advantage of the tax credits the government is offering.  After all, post-secondary education has gotten quite expensive.  Any assistance can go a long way to alleviate the financial toll on both the students and their families.

Most post-secondary students automatically qualify for three basic non-refundable credits:

  1. the tuition credit,
  2. the education credit and
  3. the textbook credit.

The tuition credit is available for tuition fees paid to a post secondary institution.  Students can claim fees over $100 and receive a tax certificate from the educational institution.

For the education credit, full time students can claim $400 for each month they are enrolled and part-time students can claim $120 for each enrollment month.

Those who are entitled to the education credit can also claim the textbook credit.  For students who qualify for the full-time education credit, they can claim $65 per month and $20 for each month they qualify for the part-time education amount.

post secondary students and financial assistance

Getting ahead of the game will help post secondary students better understand the tax breaks available to them.

If a student does not have enough income to take full advantage of the above credits in any given tax year, they have a few options.  They can transfer up to $5,000 to a spouse or partner, a parent or grandparent, or even carry forward either the entire amount or the unused amount to a future tax year.

Other tax benefits that can assist students strapped for cash are:

  • Public transit tax credit – Students who take public transit can receive  non-refundable tax credits by claiming the cost of their monthly or annual passes. The credit is calculated by multiplying the cost by the lowest income tax rate.  For example in 2015, the lowest tax rate was 15{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5}.  If the cost of the transit pass was $1,092 for the tax year, the credit would $163.80 ($1,092 x 15{cae2521f64dcff784c511b644c6cc8c98f9594c79acdd41ba953a724385391e5}, the lowest tax rate).  This amount can be claimed by the student themselves, or their spouse/common-law partner.
  • GST/HST tax credit – Low/modest income students can qualify for this tax-free quarterly payment as long as they are at least 19, a resident of Canada and file a tax return.
  • Moving expenses – To qualify, the student must be enrolled full time at a post-secondary institution and their new home must be at least 40 km closer to the school.  These expenses can only be deducted from the taxable part of their scholarship, fellowships, bursaries, certain prizes and research grant.  Any unused moving expenses can be carried forward to a future year.
  • Interest paid on student loans – Only the student can claim the interest they or their relative paid on the loan for the current tax year and/or the previous 5 years. Any unused amount can be carried forward by the student, but is not transferable.  The loan must be from the following:
    • the Canada Student Loans Act;
    • the Canada Student Financial Assistance Act;
    • the Apprentice Loan Act; or
    • a similar provincial or territorial program for post secondary education.

A very important note to point out.  As part of the 2016 Federal Budget, both the education credit and the textbook credit will be phased out effective January 1, 2017.  So students, be sure to take advantage of these two credits before they are cancelled.

If you would like more information on the topic discussed in this article, or other programs that can help you, your family, or your business, please contact GB Pilley & Associates Ltd., Chartered Professional Accountants at 604 926 3522.

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