Students facing hefty costs for post-secondary education may be able to benefit from some welcome tax breaks.
"Whether you are a full or part-time student in college or university, you may be able to claim valuable tax credits on your personal income tax return," explains Chartered Accountant Stella Gasparro, Partner and Regional Tax Leader, Meyers Norris Penny LLP in Toronto.
She has these tips for potential tax savings:
Always file an income tax return – even if you have no income – and claim the GST Credit, which is a refundable tax credit available to lower income individuals 19 years or older. Filing a return also enables you to accumulate future contribution room in your RRSP if you earned income from employment or a business during the year.
Tuition and Education Tax Credits provide significant assistance. Students can claim 15 per cent federal and 6.05 per cent Ontario non-refundable credits for eligible tuition fees plus $400 per month of full-time enrollment ($120 per month part-time). Part-time students with disabilities qualify for the full-time Education Tax Credits.
The Textbook Tax Credit awards an additional non-refundable credit to alleviate the cost of textbooks ($65 per month for full-time; $20 per month for part-time students).
Non-refundable tax credits can only be used to offset taxes owing; however, any unused credits can be carried forward indefinitely to offset future taxes. Alternatively, up to $5,000 federally ($6,141 in Ontario for 2009) of the tuition, education and textbook amounts can be transferred to a supporting individual (parents, grandparents or spouse).
Online courses may qualify if you must be in virtual attendance on a full-time basis.
University programs at recognized universities outside Canada may be eligible, as long as courses last 13 consecutive weeks and lead to a degree.
The Student Loan Interest Tax Credit enables students to claim a non-refundable tax credit for interest paid on government student loans in the year or unclaimed in the past five years.
Annual, monthly and certain weekly public transit passes qualify for a non-refundable tax credit. Electronic payment cards may also qualify if you purchase a certain monthly amount.
Students living away from home in Ontario can claim their rent, or up to $25 a year of living in residence towards the Ontario Property Tax Credit.
Income from scholarships, fellowships or bursaries is generally tax-exempt or can qualify for a $500 exemption.
Students who must move to attend school can potentially deduct their moving expenses against any part-time income, including a summer job.
For couples with children: if one spouse is in school and meets certain criteria, the higher income spouse can claim child-care expenses.
Under the Lifelong Learning Plan, adult students returning to school may withdraw funds from their RRSPs tax free to fund their education.
The Tax Free Savings Account is another tax-effective vehicle that can help in saving for education.
Finally, Gasparro advises students to be strategic and consider their overall family tax situation in determining how to use these tax credits most effectively.
The Institute of Chartered Accountants of Ontario is the qualifying and regulatory body of Ontario’s 33,000 Chartered Accountants and 5,000 CA students. Since 1879, the Institute has protected the public interest through the CA profession’s high standards of qualification and the enforcement of its rules of professional conduct. The Institute works in partnership with the other provincial Institutes of Chartered Accountants and the Canadian Institute of Chartered Accountants to provide national standards and programs that are used as examples around the world. </em>
