As we step into the new post-secondary school winter semester, it's important to review the financial aspects of education.
Despite the shifting landscape of learning over the past few years due to the pandemic, the costs associated with post-secondary education remain a constant challenge. Tuition bills, housing expenses, and meal plans continue to be significant financial burdens for students and their families.
Fortunately, there are tax credits and benefits available to help alleviate some of these costs.
Here is an overview of the tax breaks that students (or their family members) can claim for the 2023-24 academic year.
Tuition Fees
The largest expense for most post-secondary students is tuition fees. Thankfully, there is a federal tax credit that allows students to claim a portion of these expenses.
If a student incurs over $100 in tuition costs at an eligible post-secondary institution, which includes most Canadian universities and colleges, they can claim a non-refundable federal tax credit of 15% of their tuition fees.
Many provinces and territories also offer equivalent provincial or territorial credits, with rates varying by jurisdiction.
Both federal and provincial credits reduce the tax amount payable. If a student doesn't owe taxes due to low income, they can carry forward the credits for use in future tax years or transfer them (within limits) to a spouse, parent, or grandparent.
Eligible Tuition Fees
Eligible tuition fees include:
- Admission fees
- Charges for library or laboratory facilities
- Exemption fees
- Examination fees integral to a program of study
- Application fees (if followed by enrollment)
- Confirmation fees
- Charges for certificates, diplomas, or degrees
- Membership or seminar fees related to academic programs
- Mandatory computer service fees
- Academic fees
Certain ancillary fees, like health services and athletic fees, may also qualify as eligible tuition fees, but they are usually limited to $250, unless required for all full-time or part-time students.
Initiation fees or entrance fees to professional organizations and administrative penalties are not eligible for the credit. The cost of books is also not covered, except when they are included in the cost of a correspondence course provided by an eligible educational institution in Canada.
Some other expenses excluded from tuition fees for tax credit purposes, include extracurricular student social activities, medical expenses, transportation, board and lodging, and goods of enduring value.
Rent, Food, and Personal Expenses
Unfortunately, there’s no tax deduction or credit available for housing, food, or other personal living expenses. Regardless of whether a student lives on or off-campus, these expenses are considered personal and living costs and cannot be claimed for tax purposes.
While student-specific deductions and credits have become more limited in recent years, there are still several credits and deductions that post-secondary students can claim, such as deductions for moving costs.
There are also programs in place that are there to assist low income individuals, which often includes students out on their own for the first time. This includes the Trillium Benefit, Northern Ontario Energy Credit, Energy and Property Tax Credit, Sales Tax Credit, Low-Income Workers Tax Credit, and more. Students must meet the necessary eligibility criteria to receive these benefits.
Student Debt
Many Canadian students rely on loans to finance their education, and they often do not need to begin repaying these loans until after graduation. However, once repayment begins, students can claim a federal tax credit of 15% for the interest paid on qualifying student loans, under specific circumstances.
It's essential for students to understand that only interest on government-sponsored student loans qualifies for this credit. Interest paid on loans from other financial institutions, such as lines of credit, will not be eligible for the student loan interest tax credit.
If a student consolidates their government student loan with other debts through a financial institution, the interest on that government student loan becomes ineligible for the tax credit. Therefore, when evaluating the benefits of preferential interest rates offered by financial institutions, students must consider the potential loss of the student loan interest tax credit in the future.
It’s also important to note that the government has programs in place to help students during loan repayment if they are unable to make payments. This includes flexibility in the monthly amount being paid as well as a program where the government assists in repayment. When deciding what loans to take or whether or not to consolidate loans, it is important to consider these programs as they may offer better repayment terms or flexibility when you need it.
Knowing What’s Available to Students Will Help With Tax Planning
As students begin the 2023-24 academic year, it's essential to be aware of the tax benefits available to offset the costs of post-secondary education.
While not all expenses can be claimed, taking advantage of eligible tax credits can help ease the financial burden on students and their families.
For more information on tax planning for the students in your family, contact us today.
