What are Tuition Tax Credits?

If you’re a Canadian post-secondary student, you’ve likely wondered what a tuition tax credit is and how to use it. Or, maybe you’ve looked on your CRA account and wondered what those carried over amounts are for. Understanding tuition tax credits and how to use them properly can help save you or your loved ones money during tax season. Read on to learn about what tuition tax credits are, how to calculate them, and how we at Gallo LLP can help!

What is a tuition tax credit?

A tuition tax credit as a non-refundable credit you can put towards your balance owing on your taxes. Tuition tax credits are available to anyone over 16 years old who is enrolled in post-secondary level courses at a designated education institution in Canada. Students attending schools outside Canada can also qualify if the time aboard is full-time studying lasting at least 3 weeks. The amount you pay in tuition fees gives you a tax credit that can then be applied to your taxes, you should receive a tax receipt from your university showing how much tuition you paid during that tax year, which will allow you or your accountant to calculate the tuition tax credits you have earned and claim them on your tax return. This reduces the amount of tax you have to pay for your provincial and federal taxes. Other tuition deductions include examination fees paid to an educational institution, professional association, provincial ministry or other similar institution, to take an occupational, trade or professional examination. If the exam is required to obtain a professional status recognized by federal or provincial statute, to be licensed or certified as a tradesperson, or to allow you to practice the profession or trade in Canada, the fees may be eligible for some tuition tax credit. 

Who can claim a tuition tax credit?

Tuition tax credits are only available to students who are over 16 and studying at a post-secondary institution. Students either need to be studying in Canada, or be Canadian and studying full-time while abroad for at least three weeks. If you don’t have a enough income in order to make claiming you tuition tax credits a wise choice, you have the option to transfer up to a maximum of $5,000 of the current years federal tuition amount and where applicable the maximum for provincial and territorial tuition, education and textbook amounts, minus the amount you used to reduce your tax owing. These tuition tax credits can be transferred to a spouse, common law partner, parent, or a grandparent. 

How do you claim a tuition tax credit?

Tuition tax credits should be automatically applied to your tax return to calculate any balance owing, if you have a balance owing the credit will be applied. If you have any unused tuition credit, the fastest way to find how much you have left is through the CRA My Account and go to tax returns and find the carryover amounts section.

How is tuition tax credit calculated?

Your tuition tax credit is calculated by multiplying the total amount of tuition paid from your university by the federal tax credit rate for that credit. For 2020 it was 15%. Your tax liability is then reduced by that credit amount. 

What happens to your tuition tax credits if you don’t have any tax payable?

If you don’t have any taxes payable, the credit can either be carried forward or transferred to a spouse, common law partner, parent, or grandparent who does have taxes payable. If you don’t want to transfer your credits, the carry forward amount is unlimited, so you’ll have access to the tax credits until you need to use them. 

How can a CPA help you with your tax credits?

If you have tuition tax credits, a Chartered Professional Accountant can help you make the right financial decisions in using them. They’ll look at your personal finances and those of your partner or parent and help determine if you should use your tax credits now, carry them forward, or transfer them to another person. CPAs will look at your taxes and finances holistically and help you make the best decision.

Gallo LLP Chartered Professional Accountants can help you win with your personal taxes. We’ll help you find every applicable deductible and advise you on the best choices to make for your current and future taxes. Contact Gallo LLP for the best tax advice.

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