September is back-to-school month. In addition to the excitement and anxiety, those in post-secondary schooling often face fairly substantial expenses.
Fortunately, our tax system allows many avenues of tax relief for post-secondary education students. Here are the most common tax issues for students.
Hitting the books
Education amount
For the federal education amount, a student may claim either the $400 full-time amount or the $120 part-time amount, depending on the parameters of the program in which he or she is enrolled. Either way, the amount is multiplied by 15%, the lowest income-tax bracket rate, for a value of $60 or $18 for each month of full- or part-time enrollment, respectively.
Textbook amount
A student qualified for the education amount may also claim the textbook amount. The monthly amount for full-time students is $65 and for part-time students is $20, being worth about $10 and $3 per month, respectively, once multiplied by the 15% rate.
Tuition credit
Eligible amounts include fees for admission, library access, laboratory usage, athletic facilities, examinations and diplomas. Student association fees do not qualify, nor do any amounts reimbursed, for example, by an employer. The actual amount is again multiplied by the lowest income-tax bracket rate to determine the value of the credit. The amount must total at least $100 per institution in order to claim the credit.
Transfers and carryforwards
If a student does not have enough income to make use of the education, textbook and tuition credits, it may be possible to transfer up to a $5,000 amount (that is, $750 of value) to a spouse, common-law partner, parent or grandparent for that year. Alternatively, such amounts may be carried forward to be used against the student’s future years’ income, but transfers to other individuals in those future years are not allowed.
Work and study
Educational Assistance Payments (EAP)
Amounts paid to a student from a registered education savings plan (RESP) as an EAP will be taxable to the student. These taxable amounts are the earnings and payout of government grant money previously received into the RESP. Amounts drawn from an RESP that are return of contributions are not taxable, whether paid to the student, to an educational institution directly or back to the plan subscriber.
Tax-exempt awards
Scholarship, fellowship and bursary income is tax-free so long as the associated enrolled program is one that entitles the student to claim the education amount.
Getting there and back
Moving expenses
A person who moves at least 40 kilometres to attend a post-secondary institution may be entitled to claim moving expenses, but only as a deduction against the taxable portion of scholarships, research grants and the like.
Transit passes
Though certainly not exclusive to students, public transit passes are obviously used frequently by post-secondary education students. The tax credit for such passes is welcome relief.
GST/HST credit
The commencement of post-secondary education often coincides with the student having turned 19, which is the threshold age to qualify for the GST/HST credit. To obtain the credit, which is in the form of a quarterly payment or direct deposit, the individual must file a tax return and check the appropriate box.
Out into the world
Moving expenses, revisited
Travel to a summer job may qualify for the moving expense deduction, as long as the 40-kilometre requirement is satisfied. The deduction is net of any reimbursement or allowance paid by the employer.
Interest on student loans
On the repayment of student loans, an amount may be claimed for the interest paid. This applies to loans under the Canada Student Loans Act, the Canada Student Financial Assistance Act and similar provincial/territorial laws. If desired, this claim can be carried forward up to five years from the date the interest is paid.
Lifelong learning plan (LLP) repayments
Generally, LLP repayments to a registered retirement savings plan must commence no later than five years after the first withdrawal and be completed in 10 years. However, LLP repayments often commence earlier. Failure to make a required payment results in the amount being included in income.