Back-to-school shopping is a time-honoured tradition. And for families with young children, the bill for pencils, notebooks and a new outfit for the classroom usually seemed manageable.
But just like your kids, that shopping bill keeps growing with each passing year. Soon enough you'll be comparing prices for laptops and furniture for your older child who is moving from home to continue her or his education. And I haven't even mentioned tuition for post-secondary schools yet.
That's why it's important to remember that studying is not just for kids. By learning about the various tax credits and deductions available for students, parents can ensure that this type of homework actually puts money back into their hands.
Education Credit
A student may deduct from federal taxes a credit equal to the lowest tax rate percentage (i.e., 15 per cent for 2014) multiplied by $400 per month (i.e., $60 a month) for each month in the year that the student is enrolled full-time in a designated institution and qualifying educational program.
This includes full-time post-secondary students enrolled in distance education programs or correspondence courses. (Note: There is no full-time enrollment requirement for students who are disabled or cannot be enrolled full-time by reason of mental or physical impairment.)
A qualifying educational program is one that requires a minimum of ten hours per week of work and is a least three consecutive weeks in duration.
The program must also be at a post-secondary school level except in the case of courses to improve occupational skills certified by the Ministry of Human Resources Development.
However, the credit is unavailable where the student is reimbursed for the course by his or her employer or if the course is taken as part of an employee's duties and the student is paid.
Any unused portion of the education credit may be transferred to a spouse, parent or grandparent, or can also be carried forward for future use by the student.
By the way, fellowships, bursary income and achievement prizes are fully exempt from tax – provided that the student is enrolled in a program that qualifies for the education amount (as opposed to the previous rule in place prior to 2006 which allowed only the first $3,000 to be exempt).
Part-time Education Credit
Part-time students are also entitled to claim a federal education credit of $18 per month (i.e., 15 per cent of $120 per month).
To be eligible for this credit, part-time students must be enrolled in a qualifying educational program lasting at least three consecutive weeks and involving a minimum of 12 hours of courses per month. The unused portion of the part-time credit may also be transferred to a spouse, parent or grandparent, or carried forward for future use.
Read more from Mondaq