For students attending Carleton University, the University of Ottawa, or any post-secondary institution across Canada, the financial burden of higher education is significant. While tuition, books, and living expenses add up, the CRA offers significant relief through a combination of education tax credits and deductions. However, the system is not automatic; you must actively file your tax return to claim these benefits.
At AI Tax Consultants, our Ottawa team specializes in helping students and their families maximize their financial recovery. We understand that tax rules are complicated, especially after the federal government eliminated certain credits. That’s why we want to clarify the essential benefits that are still available and how to claim them correctly.
1. The Core Benefit: The Tuition Tax Credit
The primary aid tool is the Tuition Tax Credit. This is a nonrefundable tax credit that is calculated as 15% of the eligible tuition fees you paid in the year. Specifically, this credit can be used to reduce your federal taxes payable. As a result, to claim this credit, you must have an official T2202, Tuition and Enrollment Certificate, issued by your designated educational institution. In addition, the T2202 form summarizes your eligible tuition and fees (which must generally exceed $100 per institution) and the months you were enrolled full-time or part-time. Extracurricular activities, transportation, and textbook fees are generally excluded from this amount.
2. Strategic Use: Carry Forward or Transfer
The most strategic feature of education tax credits is their flexibility. Because many students have low taxable income, they may not pay enough tax to fully use up the tuition credit themselves. Therefore, the CRA allows you two powerful options for any unused amount when your own tax liability drops to zero. First, you can carry forward the unused amount indefinitely to claim in future years while you are in the workforce and earning more income. Alternatively, you can transfer up to $5,000 of the current year’s federal tuition amount to an eligible family member, such as a spouse, common-law partner, or parent or grandparent. This transfer helps the family unit immediately reduce its overall tax bill.
3. Claiming Interest Paid on Student Loans
If you financed your postsecondary education through a government student loan program (federal or provincial), the interest you paid on that loan is eligible for a nonrefundable tax credit. What’s more, you can claim interest paid in the past five years, even if you didn’t claim it the year it was paid. Importantly, however, this credit can only be claimed by the student—it cannot be transferred to a parent or spouse. Thus, it is necessary to have an annual statement from your loan provider to claim this on line 31900 of your tax return.
4. Other Potential Deductions: Moving Expenses
Although not a credit, the moving expense deduction is a must-have benefit for students who relocate for their education. Specifically, you may be able to deduct eligible moving expenses if you moved at least 40 kilometers from your postsecondary institution. This deduction can apply to expenses such as travel, transportation, and temporary housing expenses. Additionally, this deduction can only cover scholarships, fellowships, bursaries, or research grant income received from the same institution.
Don’t let valuable education tax credits go unclaimed. Filing your tax return is the gateway to unlocking these benefits. Contact AI Tax Consultants in Ottawa today to ensure your student return is filed correctly, maximizing your refund or the benefits that pass on to your family.
(FAQs)
1. What is the most important document needed to claim Education Tax Credits? The most important document is the T2202, Tuition and Enrolment Certificate, issued by the educational institution. This form summarizes the eligible tuition fees paid and the number of months the student was enrolled, which are necessary to calculate the tax credit amount.
2. Can a student transfer unused Education Tax Credits to their parents? Yes. If a student does not owe enough tax to fully use their Tuition Credit, they can transfer up to $5,000 of the current year’s eligible federal tuition amount to an eligible family member, such as a parent, grandparent, or spouse, to reduce the family’s overall tax bill.
3. If I paid interest on my student loan, can my parents claim that tax credit? No. While the Tuition Credit can be transferred, the credit for interest paid on eligible government student loans can only be claimed by the student themselves. The student can, however, claim interest paid over the past five years.
