Once again, it’s that time of year, back to school is finally here! Back to school is regarded as one of retail’s biggest spending events of the year. But sales aren’t the only thing to look forward to this season. Did you know back to school savings can also apply to your taxes?
The costs associated with post secondary education can be burdensome, to say the least. In recognizing this, the Canadian government offers a variety of tax credits to help lower your taxes and encourage ongoing education and training. We explain what tax credits are through our blog post. Below, we dive into each of these tax credits to increase your savings!
Tuition Tax Credit
If you will be going back to school this year, you may be eligible to claim federal tuition credits if certain criteria are met. To qualify, you must have taken the course at a post-secondary institution, for the purpose of developing or improving skills in an occupation, and the educational institution must be certified by the Minister of Employment and Social Development Canada. Tuition fees paid to a med school outside of Canada also count for this credit. You will receive an official tax receipt from the post secondary institution, indicating the tuition amount paid for the calendar year. This amount is used to calculate your tuition tax credits, which can then be claimed on your return.
Transferred Tuition Tax Credits
If a student does not need their tuition tax credits this year, they are able to transfer a portion of this amount to a parent, grandparent, or a spouse/common-law partner. Only one person can claim this transfer from the student, but it does not need to be the same person from year to year. The student can transfer up to $5,000, but cannot transfer any amount carried forward from the previous year.
Canada Training Credit
If you took any courses or training related to your professional education and development in 2021, you may be eligible to claim this credit on your tax return. This new refundable tax credit was introduced in 2019 to help Canadians with costs associated with tuition or other course-related fees. Eligible applicants are entitled to accumulate up to $250 in their CTC limit each year– up to a maximum of $5,000 in a lifetime. Your CTC limit will be communicated to you each year on your notice of assessment and will be available through the Canada Revenue Agency’s My Account portal.
Student Loans Interest
If you received a student loan as a result of attending post-secondary education, you may be eligible to claim an amount for the interest paid on the loan during that year. You can only claim an amount for interest not already claimed. If you have no tax payable for the year the interest is paid, it is advised to carry the interest forward and apply it on your return for any of the next 5 years. Interest on student loans cannot be transferred to another individual.
Lifelong Learning Plan
If you have an RRSP, this plan allows you to withdraw funds of up to $10,000 per year, for the purpose of paying training or education expenses, such as tuition fees, for yourself or your spouse/common-law partner. To qualify, the student must be enrolled on a full time basis in a qualifying educational program at a designated educational institution.
To learn more about these tax credits, contact one of our financial advisors today here! We are happy to help.