I paid for my childs education, why can’t I claim it?
The rules surrounding tuition are complex at best. While the government allows for transfers of tuition to parents, grandparents and spouses. They have rules on when and how much can be transferred.
In addition to these rules, you also need to make sure that you correctly file your child’s tax return in order to take advantage of any unused amounts and to ensure that the transfer is done correctly.
If you do not file and transfer correctly, be prepared for a tax bill down the road!
I paid for the school, so I am claiming it!
One of the most common misbeliefs that we encounter every year is that parents believe they can claim ALL of the school credits, just because they paid for it. While unfortuantly this is not correct. The rules surrounding who can claim the school are as follows:
- The Student First – If the student is working and their income is greater than their normal tax credits, the student will be required to pay tax. In situations like this, the student MUST use as many educational credits as possible to reduce their tax payable to zero. Once the student no longer has to pay tax we can look at transferring of credits.
- Amounts that can be transferred – If the student has more educational credits that they can use, they may be able to transfer some of the leftovers to a parent, grandparent or spouse.
- These amount are limited to the FIRST $5,000 that were earned in the year.
- If you child has to use $1,000 of their credits, only $4,000 can be transferred, even if they earned more than $5,000 in that year.
- Amounts carried over from previous years can not be transferred
- In order to transfer, the amounts must be reported on the federal and provincial schedule 11’s
- The student must sign the back of the T2202A allocating the amount to their chosen transferee
- The student can choose not to transfer and carry forward the amounts for when they can use them.
Should we transfer the unused amounts or save them? Who gets more?
As tuition amounts are non refundable tax credits, it does not matter who claims them. They are worth the exact same amount. In Manitoba that amount is 25.8%, or if the full transfer of $5,000 takes place, the increase in the refund is $1,290 to the transferee.
- Should we make the transfer? – Well, that is the big question and remains the students decision. As the net amounts of tax reduction, or refunds will not change, it would be advisable to take the transfer.
- As the CRA will not give you interest for waiting.
- If you were to takle the transfer of $1,290 and invest it at a rate of 2.5% you would miss out on $32 per year.
- Better yet, use the money to pay for next years tuition, textbooks or day to day living expenses.
- Our professional advisers will be glad to give you a before and after report showing you how much the transferee benefitted from the transfer
What you do with the money is up to you. You are a better judge of how to spend it than the government!
Do I need to save the reciepts so I can claim the high
cost of text books?
NO. You cannot claim the costs of textbooks.
Prior to 2017, when we claimed your tuition costs, we would also also apply for educational credits based on part-time and full-time enrollment as provided by the school. The amounts that you receive were in lieu of textbook costs, student fee’s, parking, and other school expenses.
Unfortunatly in the 2017 Trudeau Budget, the Federal Government eliminated these credits. Fortunately some of the provinces maintained these credits as they understood the value of a higher edudation and chose to maintain the credits received. Here is a list of the provincial credit amounts for 2019:
- FULL TIME Students –For every month that you are a full time student, you are entitled to the following amounts:
- MB – $400
- AB – $753
- NL – $200
- NS – $200
- PE – $400
- NT – $400
- NU – $465
- BC, SK, ON, NB and YT – The tuition credits for these provinces have also been eliminated
- PART TIME Students – For every month that you are a full time student, you are entitled to the following amounts:
- MB – $120
- AB – $226
- NL – $60
- NS – $60
- PE – $120
- NT – $120
- NU – $140
- BC, SK, ON, NB and YT – The tuition credits for these provinces have also been eliminated