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Key deductions and tax credits for Canadian students

Student tax deductions

As students begin to pay their tuition for the upcoming fall semester, it is important to know what fees and expenses can be deducted on this year’s tax return.

In last week’s column, I discussed things parents should look at when considering paying for their children’s post-secondary education. As a follow up, this article will highlight some of the key deductions and credits that can help reduce your family tax bill for the 2021 filing year.

Moving Expenses:

A full-time student may be able to claim the expenses required to move to the education institution if they move at least 40 kilometers closer to the school. Moving expenses can include flights, rental of vehicles, and shipment of clothing and other goods to the institution.

However, moving expenses can only be claimed against the taxable portion of scholarships, fellowships, bursaries, research grants or other similar income. Moving expenses can be claimed whether the student is attending an institution within or outside of Canada.

It is important to ensure that receipts must be presented for the expenses claimed.

Interest paid on student loans:

To cover the costs of obtaining a post-secondary education, a student may require a loan to help pay for tuition and living expenses. It is important to compare the interest rate that will be charged, and the student should also consider repayment terms, and whether the interest is deductible for tax purposes.

If the student takes out a loan under the Canada Students Loan Act, Canada Student Financial Assistance Act, Apprentice Loans Act, or any provincial equivalent, the interest paid on the loan can be deducted from their taxes. These acts generally include most provincial and federal student loan programs; however, interest paid on private loans cannot be deducted from a student’s taxes.

Finally, the interest deduction can be carried forward for up to five years, meaning if the student’s income is not high enough to make use of the deduction, they can claim it for taxation years up until 2025.

Tuition fee credit:

The student may be able to make use of the tuition fee credit to reduce their taxes. Students attending any recognized Canadian education institution or an international university – in a full-time capacity for at least 13 weeks – may qualify for this credit.

The financial institution will distribute a T2202 slip dictating the total amount that can be claimed as tuition for the 2021 taxation year.

Any unused tuition credits can either be carried forward or it may be possible to transfer a portion of the credits as well. Students can elect to transfer their unused tuition deduction to their parents, grandparents, or partner.

Proper planning matters:

To help reduce the cost of school, it is important for students (and their parents) to be aware of the credits and deductions that can be claimed when it comes to preparing their tax returns each year. A financial planning professional can help you and your child navigate these expenses in preparation for college or university.

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About the Author

Brett, designated as a chartered investment manager and certified financial planner, is the regional director (Okanagan) for IG Wealth Management.

In addition to his “day job," Brett was appointed to the board of directors of FP Canada (formerly FPSC) in 2014, named as the board’s vice-chair in 2017 and took over as board chairman in 2019. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FP Canada board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected]

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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