The federal tuition tax credit equals 15% of eligible tuition fees payable in respect of a taxation year. It applies to tuition payable by students to most universities and colleges in Canada, as well as to other educational institutions providing courses at a post-secondary school level.
Included in the tuition credit amount are mandatory ancillary fees, such as for lab work, materials or computer services. For fees that are not mandatory, up to $250 qualifies if the student chooses to pay the fees.
The credit is also available for students who are developing or improving skills in an occupation and the educational institution (other than at a university level) has been certified as providing such skills by the Minister of Employment and Social Development Canada. The CRA takes the position that the phrase “to improve the student’s skills in an occupation” means that the student already possesses sufficient skills to enable the student to work at an occupation and the course or program must be capable of improving those skills. An occupation is considered “a profession, vocation, trade, or other particular employment.”
Each province has a corresponding tuition credit, which varies depending on the province.
Students may claim the federal credit for tuition paid to universities outside of Canada. Generally, the credit is available only if the student is enrolled full-time in a program leading to a degree and the course is at least three weeks in length. The CRA provides the following guidelines in terms of what constitutes a university outside of Canada:
“We will accept that an educational institution is a university outside Canada for purposes of the tuition credit if it meets all of the following conditions:
- it has the authority to confer academic degrees of at least the bachelor level (bachelor’s degree or equivalent) according to the education standards of the country it is located in
- it has an academic entrance requirement of at least secondary school matriculation standing
- it is organized for teaching, study and research in the higher branches of learning.”
For universities in Commonwealth countries, the CRA will also accept an eligible educational institution “that is part of the Association of Commonwealth Canada if the institution can grant degrees of at least the bachelor level.” For institutions in the United States, the CRA will accept “an accredited degree-granting institution currently recognized by the Institute of Education Sciences National Center for Education Statistics or Council for Higher Education Accreditation (CHEA) in a university outside Canada, provided that the institution can grant degrees of at least the bachelor level.”
A list of foreign qualifying universities can be found on the CRA website at Recognized universities and higher educational institutions outside Canada – Canada.ca.
In addition, if the student lives near the Canada-United States border, tuition fees paid to an educational institution in the United States that is a university, college or other educational institution providing courses at a post-secondary school are eligible regardless of whether the courses lead to a degree.
In terms of filing requirements, the student must fill out and file Schedule 11 with their tax return. They also must receive a form from the educational institution: Form T2202 from an institution in Canada, Form TL11A from a foreign institution, or Form TL11C for students commuting to attend an institution in the United States.
The credit is often claimed by the student. However, if the student has no remaining tax payable in the taxation year, the student can transfer up to $5,000 of the tuition to their parent, grandparent, spouse or common-law partner, who can then claim the credit on that amount on their tax return.
Alternatively, the student can choose to carry forward the credit indefinitely to a future taxation year, where the student can claim the credit in that future year.
The credit cannot be carried forward to a future year to transfer to one of the individuals described above. In other words, the tuition in a taxation year can only be transferred in that year.
Student has $9,000 tuition payable for year 1. Student has some tax payable (before the tuition tax credit) but uses $3,000 of the tuition for the credit in year 1 to reduce their tax to zero.
The remaining $6,000 can be carried forward for Student. Alternatively, up to $5,000 can be transferred to one of the above individuals in year 1, and any remaining amount can be carried forward to future years for Student.