2020 may be full of changes but the good news is that post-secondary students still have credits and other opportunities available to them that will help offset the cost of going to school.
To help students and their families prepare, here are the credits, benefits and deductions you should be aware of.
Tuition
Tuition is the largest post-secondary expense.
As in other years, students will be able to claim a 15% non-refundable tax credit for tuition costs for eligible institutions that exceed $100.
Amounts that qualify as tuition fees for this tax credit include:
- Admission
- Library usage fees
- Laboratory usage fees
- Exam fees
- Application fees for institution where the student enrolls
- Confirmation fees
- Fees for certificates, diplomas and degrees
- Membership fees associated with the program
- Computer service fees
- Academic fees
You cannot however claim the credit on expenses related to extracurriculars, medical expenses, parking, lodging, goods that are retained by the student, fees related to professional organizations that are not necessary for the program of study, penalties, books, or courses taken to get into the school/program of choice.
In most situations, the student will receive a T2202A with the applicable information to enter on their tax return.
Loans
Payment of student debt is generally not required until a student graduates from their program. But once payments begin, a tax credit can be claimed on interest for certain types of debt.
The interest paid on federal and provincial student loans is eligible for a tax credit come filing season. This includes programs like OSAP (Ontario Student Assistance Program). Other types of loans, like student loans obtained from a bank, are not eligible for the interest tax credit.
For students who are arranging financial support for their post-secondary education, it is important to be aware of the types of debt available to you and whether the interest on those loans can be claimed as a tax credit once you begin repayment.
When making this consideration you must not only consider the interest rates but the value of the lost tax credit.
While the choice that best suits you will be based on your specific situation, it’s important to understand the consequences of using each type of loan and of consolidating your student loan with other kinds of debt, even at advantageous rates.
Education Credit
In previous years, students were able to claim an education credit over and above the tuition credit mentioned earlier. While this credit is no longer available, students who previously could claim it but have unused amounts can continue to carry forward the credit for future years.
Other Credits
There are additional credits that don’t have to be specifically tied to education but can provide tax breaks for students.
This includes child expenses for parents returning to school and moving costs.
Generally, childcare expenses must be claimed by the parent with lower income. If, however, you are a parent returning to school, and your child is under 16 or has an impairment, the parent with the higher income can claim the expenses.
If you move to attend school and are enrolled full time, you can claim moving expenses at the start of the school year and when you move back after summer break. You must have moved at least 40 km to be closer to the school you’re attending. Expenses must also be deducted from the taxable part of grants, scholarships, etc. Any unused portions can be carried forward.
Canada Emergency Student Benefit (CESB)
Students who were not able to find employment during the summer break due to the pandemic, were eligible to receive $1,250 per month from May to August to offset lost income. Program details can be found on the Canada website.
Applications for this program must be submitted before the end of September.
It’s also important to remember that these payments qualify as taxable income and tax will be owed on the amounts come the 2020 tax filing season.
For more information on tax implications for students or tax planning in general, personal or business, please contact us today.
