How tuition tax credit reduces your financial burden?

Tuition tax credit: How does it reduce your financial burden?

 

Christmas is around the corner. All your family is anticipating a well-deserved holiday from routine existence. However, if you have a child who is either preparing for post-secondary or in the process of post-secondary courses, you are concerned about the cost of pose-secondary and can’t enjoy this season.

Canadian students pay tuition that is more than $6,000 a year on average. The cost of post-secondary education courses is a significant burden to most Canadian students and their parents. However, with this information on the tuition tax credit program, you get the opportunity to offset at least part of the expense of college or university tuition through claiming the tax credit if you qualify.

Luckily, you can get benefits from numerous tax deductions and breaks. Follow the guideline below; you can check the applicable federal rules for the tuition tax credit. Be sure the loans are available in your province, as well.

 

What is an eligible student tuition tax credit?

The tuition is the most significant education tax breaks in Canada. The student tax credit

  1. To subtract from students’ taxable income.
  2. To transfer to students’ family-like their spouse or common-law partner, their parents or their grandparent up to $5,000 worth of credits.

You do not have to claim all your tuition tax credit in the year.  You can carry forward to a future tax year.

If you are a student over the age of 16 or older enrolled in post-secondary education courses at an accredited institution, you will receive a tax credit with the total eligible fees paid for the tax year. Which means, the students who continue to be educated in post-secondary school are obviously eligible.

  • You paid fees to a post-secondary educational institution in Canada
  • You are considered a resident of Canada who paid fees to a post-secondary educational institution outside of Canada ( but be sure, you should not be at the post-secondary education school education and should be more than three-week courses.)

are eligible for the tuition tax credit. (Government of Canada)

 

Who cannot claim the student tuition tax credit?

Fees a student paid should not be by the student’s employer or someone who is reimbursed for tuition. In this case, the student is not eligible for the student tax credit. If the tuition amount is included in the student’s wages, it can be claimed. It is also true if a student’s parent gets paid the student’s earning from an employer.

A qualified school must be post-secondary or trades school. For instance, if a student who is in post-secondary or university took courses equivalently in high school,  this student might not be able to claim for the student tuition tax credit on the equivalency courses.

 

Extra tips! Tuition tax credit for examination fees of licensing or certification.

If you are willing to take an examination to get a license or certification to obtain skills or improve your skills in an occupation, you can also claim for the tuition tax credit. Examination fees paid should be to a professional association, provincial ministry, educational institution or other similar institution. This credit allows a tradesperson to prepare for a profession or trade in Canada. You might be eligible for the student tax credit. Look at the example of a receipt for licensing examination fees below.

 

Do you know? You can get a tuition tax refund.

The tuition tax credit is non-refundable. If your tuition paid is more than the tax you owe,  you can decrease your federal/provincial tax bill with the non-refundable credit. This is not related to a tax refund. You can carry forward to a future tax year if you are not able to use the full of the tax credit in the year and transfer it to your parent and grandparent or a spouse and common-law partner.

 

Tuition tax credit how does it work?

Simply, you can calculate all eligible tuition fees together. For instance, if the federal tax rate is 15 percent in 2019 and you paid $3,000 for tuition, you would qualify for the tuition tax credit of $450.

Examples:

  1. If your income is $1,000 and you paid $6,000 in tuition fees, you wouldn’t be able to use your tuition tax credits because federal basic personal amount exemption is $11,000 this year.
  2. As a non-refundable credit, the student tax credits do not expire until they are used. If you do not need to use all of your credit this year you can pass it to your parent, grandparents and a spouse to carry forward the credits left in the future
  3. On the contrary, if your family members such as parents, grandparents and your spouse are comfortable with their finances, you can use their credits after your graduation. This is an excellent method that you can utilize this credit when you are over budget.

Many students still have not seen this information, or some might be confused about it. Personalbanker always welcomes getting questions about all of your concerns with financial aid. For every concern about tax credit and deduction, we are here for you.

Calculate your tax credit here.

 

References

CANADA.CA. Example of a receipt for licensing examination fees. n.d. November 29, 2019.

Government of Canada. Eligible tuition fees. n.d. November 29, 2019.

 

 

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