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How do tuition tax credits work?

How do tuition tax credits work?

April 24, 2020

The financial burden of post-secondary education lessens when tuition tax credits offset the expense of the university. Most students over 16 years old are eligible for tuition tax credits for post-secondary courses. Certainly, the school needs accreditation. Schools outside of Canada qualify for full-time studies lasting three or more weeks.

You can’t claim your tuition tax credit if your employer reimburses you (or your parents) for the course.

Eligible courses are at a post-secondary level, including trade schools. High school equivalency courses through the university, even to prepare for college courses, may not be eligible.

Claiming Tuition Tax Credits

A tuition tax credit is a non-refundable credit. If your tuition is more than your tax bill, the credits reduce or eliminate your federal/provincial bill. Unfortunately, any remaining tuition doesn’t get you a refund. If you can’t use your full credit, unused credits can carry forward to future tax years, or transfer to your spouse/common-law partner or your parent/grandparent.

The credit amount adds all your eligible tuition fees together, then multiply that by the lowest federal tax rate. Fortunately, CloudTax calculates your credits automatically!

Note: Line 32300 was line 323 on your tax return before the tax year 2019.

Tuition Tax Credit – Documentation

Accredited education institutions issue you form T2202 that certifies you took eligible courses that qualify for the tuition tax credits.

If you are entitled to the (DTC) disability tax credit, you can attend part-time and receive the tuition tax credits.

Note: Education and textbook credits stopped in 2017 but still carry forward as unclaimed credits.

If you attended an educational institution in 2019, a completed T2202 certificate will be electronically sent to the CRA. Therefore, when it comes to filing your taxes, you will be able to access your documents through Auto-fill my return, just like your T4 slip.

Transferring Unused Credits

Unused tuition tax credit amounts calculated on Schedule 11 transfer to qualifying relatives. Spouses, common-law partners, parents or grandparents can use all or part of your unused credit. Even your spouse or partner’s parents or grandparents qualify.

You designate the individual you want to receive the transfer and the amount. Check forms T2202A, for schools within Canada and TL11A for those outside of Canada. If your spouse or partner claims you on lines 30300 or 32600 on their tax return, no one else can be transfer recipients.

Note: You can only transfer your current year’s tuition (up to $5K). Your tuition from a prior year can only carry forward.

If you receive the transfer from someone else attending school, you don’t submit the Schedule 11, receipts, or any other forms. If you need documentation later, put the student’s signature on the back of all the forms.

Confidently file your taxes online and claim your tuition tax credits with CloudTax.

 

Nimalan Balachandran is the Founder & CEO of CloudTax, an income tax filing platform, certified by the Canada Revenue Agency, that allows simple tax filers to file their taxes from home. He was a former employee at the Canada Revenue Agency, and has been in the tax preparation industry for over 10 years. His goal was to bring his passion for technology and assisting Canadians in minimizing their taxes together, by building new software that allows Canadian residents to file simple taxes on their own. Along with his background in accounting, finance, artificial intelligence & business strategy from Seneca College and Massachusetts Institute of Technology, Nimalan has also worked as a Financial Advisor at Sun Life Financials. Nimalan also co-founded a not-for-profit organization, ATI Foundation, serving individuals with intellectual and physical disabilities in the Greater Toronto Area.



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