Summer is still going strong, but the school year is also fast approaching and that means many post-secondary school students and their families are looking at ways to cut the costs of further education.
While certain costs (like personal and living expenses) aren’t eligible for any tax breaks, there are tax deductions and credits still available to students and their families. The most beneficial, and substantial, is the tuition tax credit.
Tuition Tax Credit
Any student who spends more than $100 in tuition during 2021 is eligible for a non-refundable federal tax credit of 15% on these tuition costs.
Tuition costs include fees for admission, exemptions, exams and use of libraries and labs, as well as membership and seminar fees related to the students program and administration. It also includes application fees, confirmation fees, charges for certificates/diplomas/degrees, academic fees, computer service fees (when mandatory) and some ancillary fees (up to $250), such as health service fees and athletic fees.
If a student does not have enough tax payable to use the entire credit, they can carry forward the amounts or transfer them to a spouse, parent or grandparent.
What is the loan interest?
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.
While payment of student debt is not usually required until a student graduates, this is important information for students who are looking into financial support for their education. You don’t want to simply look at the tax rate … you must also consider the lost value of the tax credit if you choose your loan.
It’s also important to understand the consequences of consolidating your student loan with other kinds of debt, even at advantageous rates.
Moving Expense Deduction
Many educational institutions are opening their residences and maybe even in person learning this fall.
That means many students may be moving away from home. In situations where the move is at least 40 km closer to the post-secondary institute, students may be eligible to claim moving expenses.
Child care expenses for parents returning to school
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.
For help determining whether you will be eligible for these tax credits and deductions, contact Koroll & Company today. We can help you create a financial and tax plan that works for you and your family as students return to school this fall.
