Tution Tax Credit For Students

Introduction:

What is Tution fees Credit?

Students pay fees to educational institutions for the entire year, and they receive a benefit at the time of tax payment, which is known as a tution tax credit.

Eligibility criteria:

1. Educational institutions in Canada that offer courses at the post-secondary school level and are accredited by the Department of Employment and Social Development.

2. Universities located outside of Canada.

3. Some institutions in the United States of America where students live near the Canada-US border.

4. Any fees paid to a specific body by an individual for trade, professional examination, or occupational purpose.

How can we calculate the amount of credit?

The total amount paid to educational institutions for tution and fees as specified above is multiplied by the lowest tax rate percentage, which is 15%.

Tution Fees Credit =Total fees paid *15 percent

Conditions and assumptions for eligibility:

1. Fees paid to educational institutions must be greater than $100.

2. The lowest tax rate after 2006 must be 15%.

Non-eligible conditions for tution fees:

1. Fees paid to institutions before 2016 but not for courses at the post-secondary school level. 2. Fees paid in 2017 or after to institutions that are not for post-secondary level, unless the student is 16 or older at the end of the year and enrolled in an institution to obtain or improve skills. For example – What is the eligibility if a student paid $5000 to an educational institution in a single year?

     = $5000*15% i.e.750.

The student is entitled to a $750 credit.

Other Important Points:

1. List of eligible universities outside of Canada: The CRA keeps a list of eligible universities outside of Canada. More information is available on the CRA website.

2. Fees cover period: This means that the credit is only based on fees paid for courses and exams taken during that calendar year. For example, if the academic session covered by eligible tution fees paid in a particular year extends from September of that year to April of the following year, the tution tax credit for the fees is computed as one-half of the fees multiplied by the lowest tax rate percentage for each of those years.

Which fees qualify as tution Fees:

1. Admission fees

2. Charges for using the library or laboratory facilities

3. Exemption fees

4. Examination fees that are required for a programme of study

5. Application fees

6. Confirmation fees

7. Charges for a certificate, diploma, or degree

8. Membership or seminar fees that are specifically related to an academic program and its administration.

Which fees are not eligible for tution fees:

1. Social activities for students;

2. Medical expenses

3. Transportation and parking facilities

4. Board and lodging

5. Items of long-term value to be kept by students

6. Initiation or entrance fees to professional organisations

The following formula is used to calculate the carry forward amount:

A+(B-C)-(D+E)

WHERE, A denotes the amount of unused tution tax credit from the previous year

B denotes the total amount of credit that may be claimed this year.

C=the lesser of (B) and the student adjusted tax payable for the current year.

D=the amount of carryover tution credit from the previous year that may be claimed for the current year.

E=tution tax credit transferred by a student to his spouse, parent, common-law partner, or grandparent for the fiscal year.

We have tried to cover as much as we can but if you want to read more about student tax credits please refer to this link.

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