Tag Archives: student

Should I Wait to Claim My Tuition Fees Until I’m Earning More Money?

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This question appears often on tax and finance chat boards in March. Tax credits and deductions are a bit bewildering the first time a person uses them. Some, like the RRSP deduction, have more value if they are used when a person is in a high tax bracket. Others create the exact same savings whether they are claimed by a person in the lowest tax bracket or in the highest tax bracket. So should someone wait to claim their tuition, education and textbook amount until they are in a higher tax bracket when they are earning more money per year?

No.

The amount you can claim because of tuition, education and textbooks will create the exact same dollar savings whenever you claim it.

The tuition, education and textbook amounts reduce your actual tax payable. So if you earned $20 000 or $200 000 or even $2 000 000 last year your tuition costs will give you back the exact same amount of money.

The amount you can claim for tuition fees, textbooks and other monthly education expenses does not reduce your taxable income. It only decreases your tax payable.

Is The Question Even Relevant?

In fact, the question isn’t even worth asking:

The Canada Revenue Agency gives you no choice, so the question is irrelevant. The tuition costs and education amounts are automatically applied to reduce your federal tax payable to 0.

If your tuition and education amounts are larger than what you need to reduce your tax to 0, then they are automatically carried forward and applied against your next income tax return. They continue to be carried forward and applied until they are used up.

The Rules

You must first claim your tuition and education and textbook amounts on your own tax return.

By completing Schedule 11, either by hand yourself or using a tax computer program, you will see if you have any tuition, education and textbook amounts left over after you have reduced your tax payable to zero.

If you have not used up all of your tuition, education and textbook amounts, you can transfer ($5000-the amount you did use) to one of the following people for them to use to reduce their tax payable for this tax year:

  • your spouse
  • your common-law partner
  • your parent
  • your spouse’s parent
  • your common-law partner’s parent
  • your grandparent
  • your spouse’s grandparent
  • your common-law partner’s grandparent

If there is still more tuition, education and textbook amount left, then it will be automatically carried forward for you (and only you) to use to reduce your tax payable in future years.
To make a transfer the student must

  • complete Schedule 11
  • complete the transfer part of the T2202A (or other) form that was received from the school

What If I Don’t Tell the CRA About My Tuition Costs Until Later?

Don’t waste your time trying to game the CRA. You’ll lose and it gives you no benefit anyway. No matter when you apply your tuition and education amounts you get the exact same number of $$ back.

Getting your money back in the future actually results in you losing money (if there is even the slightest inflation in prices each year) because $1 in the future is worth slightly less than $1 now. (I guess if there was deflation that might not be true, but we haven’t experienced deflation in my lifetime.)

In most cases, your tuition costs are reported on a T slip called the T2202A. You get a copy from your school. The CRA *also* gets a copy. Eventually, they will match the slip to your account and they will know which year you earned the right to claim the reduction in tax payable. They will not necessarily immediately apply it and send you a refund cheque, however. They don’t give away money if they don’t have to. After all, you might not have claimed your savings because you generously wanted to give the government some of your money just out of the kindness of your heart.

You can apply to properly claim that amount against the year it should first have been reported and claimed by filing a T1-ADJ. You will likely get some interest as well as your proper refund when it is applied. The interest must be claimed as new income on your next tax return.

(My relative did this when he discovered he had forgotten to claim tuition for a part-time continuing education college course until three years after the fact. He received $5 in interest and had to report that amount and get taxed on it the next year. It was worth it, though, because he received over $100 in a tax refund which of course did not have any tax owing on it.)

How Else Can I Use Up My Education Amount and Tuition Credit?

If when you report your tuition and education amounts for the year you have an unused amount, you can also transfer some of that amount, up to ($5 000 – the amount you used), to an acceptable person such as your parent, your spouse or common-law partner, or grandparent. They can then use the value to reduce their own tax payable.

(This is based on the belief or hope that your parent, spouse or grandparent may be helping to pay for your education and therefore deserves to get some of the tax relief benefit.)

You do not HAVE to transfer any amount. Also, you can only transfer up to the limit.
If there is still more unused value it will be carried forward for you to use in the future. Unfortunately, you can’t transfer any of it in the future to someone else.

(If you pay additional tuition and continue your education the next year, however, you can transfer some of the newly earned credit, just not any of the carried-forward amount.)

My Company Paid for My Tuition. Can I Claim Anything?

Generally if you were working and your company paid for your tuition costs you cannot claim the tuition cost or the part-time or full-time monthly educational amounts. There is one exception: if your employer paid for the tuition but then reported that amount as part of your income. In that case, you need to check with your employer directly about whether there is any amount that you can claim.

The same rules apply if your parent’s employer paid your costs.

What If I Forgot To Report or Claim my Tuition, Education or Textbook Amounts In the Past?

You can’t just report these amounts on your current return. You have to file an adjustment to the return for the year you should have claimed the amounts.

For example, if you went to college in 2012 and forgot to report the amounts on your T2202A, you must file a T1-ADJ for 2012 to report the amounts. You can do this quite easily online if you have a Service Canada My Account.

Related Reading

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Did you feel a little flutter of alarm the first time you had to claim your education expenses? Do you think the CRA should increase the textbook amount? Please share your views with a comment.

Testing GenuTax Standard 2013 for a Student and a Parent Claiming Tuition, Education and Textbook Amounts

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A reader recently asked how GenuTax Standard 2013 handles sharing the claim for a student’s university education expenses. My children aren’t even in high school yet, so I wasn’t sure. I decided to set up a mock file for a student and a parent and use it for testing how GenuTax handles a T2202A transfer between a student and a parent.

Please remember

  • I don’t work for GenuTax nor do I receive anything from them. If you have a complex question about GenuTax, please contact their help centre.
  • I’m just a regular tax payer.
  • I’m not a tax professional! If you have any doubts whatsoever about what you are doing, please call the Canada Revenue Agency or talk to a trained income tax accountant.

Will GenuTax Standard 2013 Tell You Exactly How Much Is Available to Transfer from a Student to a Parent?

Under the CRA rules, a student must use their tuition, education and textbook amounts themselves first to reduce their payable taxes to zero. Only after they owe nothing can they transfer some of these amounts.

So I ran my tests for the same student and parent, but for three different cases. In each case, the student was employed and received a T4 but the employer (naughty naughty!) did not withhold any tax, CPP or EI from their earnings.

Case 1: the student earned $8 000
Case 2: the student earned $15 000
Case 3: the student earned $25 000

Hey, Case 3 could be a co-op student or she could be employed by her extremely rich relative’s company.

I was pleased to see that GenuTax Standard 2013 did calculate how much of the student’s tuition and education amounts could be transferred.

For my Cases, the program decided the student could choose to transfer
Case 1: 5000 federally (the maximum the CRA allows); 6620 provincially (for ON)
Case 2: 2155 federally; 1194 provincially
Case 3: 30 federally; 0 provincially

So it appears that GenuTax Standard 2013 is telling you exactly how much may be transferred from a student to a parent, grandparent, or spouse’s or common-law partner’s parent or grandparent.

NOTE: A student does NOT have to transfer anything if they do not want to.

CAUTION: One Thing GenuTax Standard Does Not Tell You About Transferring Education Amounts

I did find one omission in the GenuTax Standard program that I think is worth mentioning.

A student must claim their education amount in the year they received it if they have any taxes owing.

The balance, if any, can be transferred or can be carried forward to a future tax year.

According to the 2013 CRA General Income Tax and Benefit Guide, however, if a student chooses to carry forward all or part of their education amount, that carried forward amount can ONLY be claimed by the student in the future. It cannot be transferred to anyone, including a parent or grandparent or spouse in the future.

I was a bit surprised that the program did not warn the user of this issue.

So if your student opts to carry forward their education amount, be aware that no one but the student can claim it in the future.

How Do I Know How Much to Transfer from My Student to My Tax Return? Will GenuTax Tell Me?

It’s possible that the person receiving the transfer of the education amount does not owe a huge amount in taxes.

If so, they may want to know if GenuTax Standard will tell them just how much to transfer to reduce their taxes to 0, so that they only transfer what they need, and let the student carry forward the balance for the student’s future tax returns.

Unfortunately, GenuTax Standard does not “iterate” between the two returns to calculate this number.

GenuTax Standard will not tell you how much of the education amount to transfer from your child to you.

How Can I Figure Out How Much of the Education Amount to Transfer to the Parent and How Much to Carry Forward?

The only way I can see to check how much of the education amount to transfer to the parent and how much to carry forward is to run some test cases.

Complete the student’s tax return first. (DON’T send it in yet!)

This will tell you the maximum amount that may be transferred to a parent or grandparent both federally and provincially/territorially.

Next, complete the parent’s tax return, claiming only 0 for the transferred education amount, both federally and provincially/territorially. Check how much tax is owed. (DON’T send it in yet!)

If nothing is owed, don’t transfer any credits from the student. Update the student’s return to carry forward all unused credits. File both returns.

OR If some tax is owed by the parent, update the parent’s tax return by putting in the maximum that can be claimed for the transferred education amount, both federally and provincially/territorially.

How much tax is owed? If the parent still owes tax, then claim the maximum amount, and update the student’s tax return to transfer the maximum amount. File both returns.

If the parent’s tax owing is 0 it will be necessary to guess and check how much of the education amount to claim.

GenuTax standard does not go back to the Dependant’s section and reduce the amount of the transfer to the minimum needed to reduce the tax owing to 0, unfortunately.

To do so, you will need to know how to get at the information you entered the first time in the parent’s return.

With the parent’s tax return file open, click on the Jump to Section (F9) button at the bottom of the screen.

From the list, select Dependants.
Click the Next button.

From the Dependants So far, you have entered details regarding…. Screen

Click to select the radio button beside Edit details for a dependant.
Click Next.

Now you can change how much of the education amount you wish to transfer to the parent.

If the parent’s tax owing is 0, revise the parent’s return by claiming 1 /2 of the maximum amount both federally and provincially/territorially.

If the tax owing is still 0, then the student only needs to transfer 1 /2 of their maximum amount or less. You’ll need to try again, this time using 1 /4 of the maximum amount or less.

BUT if now the parent owes tax, then the amount that needs to be transferred is between 1 /2 and all of the education amount eligible for transfer. You’ll need to try again, this time using 3 /4 of the maximum amount.

In other words, you’ll have to keep trying different transfer amounts until the parent owes no tax. Then the transfer amount that reduced the parent’s tax to zero should be used to update the student’s tax return.

Be Forewarned
While you read through the article, please be aware that I often refer to “the parent” as if there is only one. The Education amount can be transferred to

  • either parent of the student,
  • either parent of the spouse of the student, or
  • either grandparent of the student or
  • either grandparent of the spouse of the student.

Before carrying forward an unused Education amount, be sure to consider all of these possible people who could receive a transfer of the amount.

In fact, using a different set of screens and different lines in the tax return, the Education amount can also be transferred to the spouse (including the common-law spouse) of the student. I don’t test that type of transfer in this article.

Don’t Forget to File Your Actual Tax Returns!

Once both the student and the parent are paying as little tax as possible, the tax returns must be filed. GenuTax does NOT file the tax returns automatically. You must follow the on screen instructions to NETFILE each of the 2 returns or print out a paper copy of each of the 2 returns and mail them in.

If you are NETFILEing or sending in a paper return, you do not have to include the Form T2202A with the amount being transferred. Keep it though for 7 years in case of an audit.

If you are sending in paper returns, the student must include a completed Schedule 11 showing how much of the education amount is being transferred to the parent and/or how much is being carried forward. The parent does NOT submit a Schedule 11.

If you are NETFILEing, the information for Schedule 11 is included in the file GenuTax Standard sends to the CRA.

How Do I Use GenuTax Standard to Input the Education Amount on a Student’s and a Parent’s Tax Return?

Here are some details on what to enter on various screens when completing both the Student and the Parent’s tax return using GenuTax. NOTE: You must complete the Student’s tax return first so that you know the maximum education amount that can be transferred to the Parent’s tax return.

Completing the Student’s Income Tax File Using GenuTax Standard 2013

In general the return will be completed like any other tax return using GenuTax. I’m only going to mention the parts specific to being a student and/or transferring or carrying forward the education amount.

Near the beginning of the streamlined interview process, a Deductions and Credits screen will open. It lists a variety of types of deductions and credits.

Be sure to click to select the box beside: Student Credits

For my example, I decided that the child had earned income of $8 000 in 2013.

After the Deductions and Credits introduction screen, the Historical Information for Capital Gains Deduction screen is displayed and then the Tuition, Education and Textbook Amounts Carried Forward from 2012 screen.

Tuition, Education and Textbook Amounts Carried Forward from 2012 Screen
Tuition, Education and Textbook Amounts Carried Forward from 2012
Do you have any unused tuition, education and textbook amounts available to carry forward from 2012?
Any unused tuition, education and textbook amounts you have available to carry forward are shown on your notice of assessment or notice of reassessment for 2012.
Yes or No.

For my example, for a first year student, I answered No.

Eligible Tuitions Fees Screen
Eligible Tuitions Fees
Do you have any eligible tuition fees to claim for 2013?
Note: To claim a TRANSFER of tuition, education and textbook amounts from a child, you need to go back to the “Dependants” section of the interview.
Yes or No.

For my example, I selected Yes.

Eligible Tuition Fees Screen
Eligible Tuition Fees
Enter the total tuition fees paid for eligible courses you took in 2013.
NOTE: To be able to claim the tuition fees paid to an educational institution in Canada, you must have paid more than $100 in tuition fees to that institution for 2013. You cannot include in your tuition fees claim the amount paid for other expenses, such as board and lodging, students’ association fees, or textbooks.
$ ______________

For my example, I entered $3600

Education and Textbook Amounts Screen
Education and Textbook Amounts
Are you eligible to claim education and textbook amounts for your studies in 2013?
To be eligible to claim this amount, you must have received either Form T2202A, Form TL11A, Form TL11B or Form TL11C, from your educational institution.
Yes or No.

For my example, I selected Yes.

Education and Textbook Amounts for Full-time Studies Screen
Education and Textbook Amounts for Full-time Studies
Enter the total number of months for the full-time credits, as indicated in column C of your Forms T2202A, TL11A, TL11B, and TL11C for 2013.
When entering this number, be sure to count each calendar month only once.
__

For my example, I entered 8

Education and Textbook Amounts for Part-time Studies Screen
Education and Textbook Amounts for Part-time Studies
Enter the total number of months for the part-time credits, as indicated in column B of your Forms T2202A, TL11A, TL11B, and TL11C for 2013.
When entering this number, be sure to count each calendar month only once. Do not include a month that was included in column C for full-time studies which you entered on the previous screen.
__

For my example, I entered 0

Transferring Unused Federal Tuition, Education, and Textbook Amounts to Another Individual Screen
Transferring Unused Federal Tuition, Education, and Textbook Amounts to Another Individual
Based on your entries, the unused portion of your federal tuition, education and textbook amounts is $5000.00 If you wish, you may choose to transfer all of a portion of this amount to your spouse or common-law partner (if applicable), to your parent or grandparent, or to your spouse’s or common-law partner’s parent or grandparent. Any amount you do not transfer will be included in the amount carried forward to future years.
MY NOTE: And can then ONLY be used by the student not ever transferred again!
Would you like to designate the transfer of an amount to another individual?
Yes or No

For my example, I selected Yes.

Transferring Unused Federal Tuition, Education and Textbook Amounts to Another Individual Screen
Transferring Unused Federal Tuition, Education and Textbook Amounts to Another Individual
The maximum federal amount you have available for transfer is $5000. To transfer all or a portion of this amount, you have to designate the individual on your Form T2202A, TL11A, TL11B, or TL11C and specify the federal amount you are transferring to him or her.
Also enter the federal amount you are transferring below.
NOTE: You cannot transfer unused 2013 amounts to your parent or grandparent, or to your spouse’s or common-law partner’s parent or grandparent, if your spouse or common-law partner is claiming an amount for you on line 303 or line 326 of his or her Schedule 1.

For my example, I selected 5000 because this student already has no tax owing and the parent has a great deal of tax owing. (Sound familiar anyone?!)

Transferring Unused Ontario Tuition and Education Amounts to Another Individual Screen
Transferring Unused Ontario Tuition and Education Amounts to Another Individual
Based on your entries, the unused portion of your Ontario tuition and education amounts is $6620. If you wish, you may choose to transfer all or a portion of this amount to your spouse or common-law partner (if applicable), to your parent or grandparent, or to your spouse’s or common-law partner’s parent or grandparent. Any amount you do not transfer will be included in the amount carried forward to future years.
MY NOTE: And can then ONLY be used by the student not ever transferred again!
Would you like to designate the transfer of an amount to another individual?
Yes or No

For my example, I selected Yes

Transferring Unused Ontario Tuition and Education Amounts to Another Individual Screen
Transferring Unused Ontario Tuition and Education Amounts to Another Individual
The maximum Ontario amount you have available for transfer is 6620. To transfer all or a portion of this amount, you have to designate the individual on your Form T2202A, TL11A, TL11B, or TL11C and specify the provincial or territorial amount you are transferring to him or her.
Also enter the provincial or territorial amount you are transferring below.
NOTE: You cannot transfer unused 2013 amounts to your parent or grandparent, or to your spouse’s or common-law partner’s parent or grandparent, if your spouse or common-law partner is claiming an amount for you on line 5812 or line 5864 of his or her Form ON428.

For my example, I selected 6620 because this student already has no tax owing and the parent has a great deal of tax owing.

Interest Paid on Your Student Loans Screen
Interest Paid on Your Student Loans

For my example, I selected No.

Completing the Parent’s Income Tax File Using GenuTax Standard 2013

I’m only going to review the parts specific to having a child transferring the education amount to the parent in this article.

When first setting up the Parent’s income tax file,
when you get to that question on the Dependants screen
be sure to click YES If you are claiming the tuition, education and textbook amount as a transfer. NOTE: You can click YES and still only claim 0 if you choose to.

For my example, assume the dependant’s net income was $8000.

After answering about your child’s net income and whether they live with you while not attending school, you will eventually get to the screen
Dependant’s Unused Tuition, Education, and Textbook Amounts
Child’s Name
Has this dependant designated an amount of unused tuition, education, and textbook amounts to transfer to you for 2013?
To do so, this dependant must designate the amount to be transferred either on the back of copy 2 of their Form T2202A; in part 3 of their Form TL11A; in part 4 of their Form TL11B; or in part 4 of their Form TL11C.
Select Yes or No.

For my example, I selected Yes.

On the next Screen
Dependant’s Unused Tuition, Education and Textbook Amounts
Child’s Name
Enter the unused tuition, education and textbook amounts this dependant has designated to transfer to you for 2013, as indicated on their Form T2202A, TL11A, TL11B or TL11C.
NOTE: If this dependant did not reside in the same province or territory as you did at the end of 2013, contact the Canada Revenue Agency (CRA.)
Federal amount of transfer (1) $ ____________
Provincial or territorial amount of transfer (2) $ ___________________

For my example, I put 0 and 0 the first time I completed the Parent’s tax return. That told me whether or not the Parent’s owed any tax without claiming a transfer of the Education amount.

If the Parent does not owe any taxes without claiming an education amount, then the child/student should just carry forward the Education amount to use in future years. (Assuming that there is not another parent or grandparent who wants to test whether they can use the transfer.)

Those were the only screens I found that were necessary to fill out for the Education amount transfer.

Overall, I was satisfied with the way GenuTax handled the Education amount. It isn’t perfect but then it also doesn’t cost anything but a donation!

Speaking of which, if you do use the program, I strongly encourage you to make a donation to help them keep offering this service.

Related Reading

  • How to Use GenuTax Standard to Complete a Tax Return for a Retired Person

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Have you used GenuTax to claim the Education amount for your own tax return? Have you used it for a transferred Education amount? Please share your “real life” experiences with a comment.