It is generally acknowledged that higher education is a worthwhile pursuit, benefiting students and society alike. As such, both federal and provincial governments have instituted tax policies that ease the tax burden on those pursuing post-secondary education. These policies serve to reduce tax payable for students and in certain cases can be transferred to parents or other supporting persons.
The Income Tax Act (ITA) provides a deduction from income for expenses incurred to move to pursue summer employment or educational opportunities.
1) Moving expenses incurred to attend an educational institution
Moving expenses incurred to move to attend school full-time at a recognized post-secondary institution can be deducted if:
Eligible moving expenses include vehicle rental, gas, reasonable accommodations and meals. Full-time enrolment is generally regarded by the CRA as at least 60% of the normal course load for a particular program of study. Your Advisor can provide you with more details on what constitutes eligible expenses, full-time studies, and recognized institutions.
2) Moving expenses incurred to accept summer employment
Where a move of more than 40 km is made to accept summer employment, eligible expenses to the extent of the income earned at the new location can be deducted.
Deduction of Interest on Student Loans
While interest on student loans does not accrue until the student leaves school, students should be aware that the interest expenses are eligible for a tax deduction at Line 319 of the general return. If the deduction is not needed, it can be carried forward for up to five years. The deduction may only be claimed by the student and is not transferable. It should be noted that this deduction applies only to student loans recognized under federal or provincial legislation and does not apply to personal loans or where student loans have been consolidated with other loans.
There are several tax credits available to students that will reduce their tax payable. In many cases, students have small amounts of income and will actually have more credits than they need to reduce their taxable income to zero. In these cases, the credits can be carried forward to a subsequent tax year or transferred to an eligible person such as a parent for their use when filing their taxes.
Education Tax Credit
Transfer and/or Carry Forward
Education tax credits that cannot be used by the student can either be transferred to an eligible person (parent, grandparent, spouse, spouse’s parent or grandparent of spouse) or carried forward to be used by the student in subsequent tax years. The amount transferred is limited to $5,000 less any amount claimed by the student and cannot be transferred in later tax years.
Public Transit Credit
If a student is using public transit (buses, streetcars, subways, commuter trains or Canadian ferries) to attend school, they can claim the costs as a tax credit provided that:
Your Advisor can provide you with more information regarding the specifics of the various credits discussed above.