CANADA TUITION TAX CREDIT

What is it?

The non-refundable tuition tax credit helps students reduce income tax by recognizing certain educational and examination fees. Eligible fees fall into five categories:

1. Tuition fees paid to a college, university or other educational institution in Canada providing courses at a post-secondary level.^[1]
2. Tuition fees paid to an educational institution in Canada certified by the Minister of Employment and Social Development for courses that provide or improve occupational skills.^[2]
3. Fees paid to a university outside Canada for full-time studies leading to a degree, where the program lasts at least 3 consecutive weeks.^[3]
4. Fees paid to an educational institution in the U.S. near the border.^[4]
5. Fees paid to an educational institution, professional association, provincial ministry, or other similar body, for an exam required to obtain professional or tradesperson status, where the status allows the person to practise the profession or trade in Canada.^[5] 

Since many students have low incomes, they often cannot use the credit in the year the fees are paid. Unused amounts can either be carried forward for future use or transferred to a supporting family member, such as a parent or spouse.

Timing of fees:

• Fees must be claimed based on the calendar year in which the course is taken, not the year in which they are paid.

• Example: Fees paid in 2023 for courses taken in 2024 are claimed in 2024.
• If fees paid in 2023 cover courses for both 2023 and 2024, the institution should issue separate certificates for each year, splitting the fees accordingly. If for some reason only one certificate or receipt is issued (for example by a foreign university), the fees must be split.^[6] 

Courses and fees that do not qualify:

• Courses taken to obtain a high school diploma or to upgrade for entry into a post-secondary program.
• Fees for transportation, parking, extracurricular activities, housing, or textbooks (these should not appear on the official tax certificate).
• Online or part-time courses from foreign institutions.

Continuing and Adult Education Courses, and ESL:

Fees paid to a university, college or other certified educational institution are eligible if the course is at a post-secondary level.

The Income Tax Act does not define what is meant by a course at a post-secondary level. However Folio S1-F2-C2 contains this wording:

Generally, for a course to be considered to be at the post-secondary school level:

1. the course should provide credit towards a degree, diploma, or certificate; and
2. A prerequisite for taking the course should be completion of secondary school.

It is generally assumed that a course is at the post-secondary school level if the education ministry for the province in which the course is given considers it to be at that level.

Most continuing and adult education courses do not require an enrollee to have a high school diploma and would not be considered at the “post-secondary school level”.

If the course is not at a post-secondary level, it can still be eligible but only if the purpose of the enrolment is to provide skills, or improve skills, in an occupation.^[7] 

A CRA folio states: “Second language training (in particular, French or English) may be viewed as providing a student with skills in an occupation as long as the course is undertaken for the specific purpose of gaining or improving language skills required for an occupation. Where a course is taken at an educational institution for personal or recreational purposes, no tuition tax credit is available.”^[8] 

Other rules:

• Fees paid by an employer can only be claimed if they are also reported as a taxable benefit on a T4 slip.
• Students who pay with a scholarship or bursary may still claim the tuition credit, but scholarships and bursaries may be partially taxable and must be reported as income.

Amount that can be claimed:

• The claimable amount is:
  Eligible fees + unused amounts carried forward – Canada Training Credit (if applicable).
• If the full amount is not needed to reduce taxes to zero, only the required portion is claimed. The balance is carried forward to future years..

Carrying forward tuition amounts:

If tuition fees cannot be fully used in a year to reduce tax, the unused amount is carried forward to the next year. This process continues until the full amount has been used.

For example, if all of a tuition amount in 2023 was carried forward because no tax was owing, and the person owes tax in 2024, then the carried over tuition amount must be used in 2024 to reduce tax. Any amount still remaining is carried over for potential use in 2025.

How to check for a carry-forward balance:

1. Review the Notice of Assessment from the prior year.
2. Log in to CRA My Account.
3. Use Auto-fill.

Complete old returns sequentially:

When a client has unused carry-forward amounts but has not filed earlier tax returns, those missing returns must be filed chronologically.

If tax was owing in an unfiled prior year and a carry-forward balance existed at that time, the carry-forward must first be applied to that oldest outstanding year. Any remaining unused balance is then carried forward to the next year. For this reason, when multiple returns are outstanding, they should always be completed starting with the oldest year. After applying the amounts in sequence, there may be no carry-forward left for the current tax year.

If a taxpayer claims a carried-forward tuition amount but has not filed a required earlier return, the CRA may deny the credit. For example: tuition was paid in 2012, the taxpayer failed to file the 2013 return, and then filed 2014–2023. If the tuition amount could not be used in those filed years, it still cannot be claimed in 2024 until the 2013 return is filed, because the carry-forward sequence remains incomplete.

Transferring tuition amounts:

If a student cannot use all or part of the current year’s tuition credit because their tax payable is already reduced to zero, they may transfer the unused amount to a spouse, or to a parent or grandparent of either themselves or their spouse.

• Maximum transferable amount: $5,000 minus the portion the student uses to reduce their own taxes.
• Restriction: Tuition amounts carried forward from prior years cannot be transferred.

Steps for the student:

1. Report the transfer on Line 32700 of Schedule 11.
2. Record the transferee’s name on the back of the tuition certificate and sign it.

Steps for the transferee:

• Claim the transferred amount on:

• Line 32400 of their T1 (if transfer is from a child or grandchild), or
• Line 36000 of their Schedule 2 (if transfer is from a spouse).

The CRA may request a copy of the signed tuition certificate at a later date.

UFile steps are set out further below.

Does Ontario also have a tuition credit?

No, as it was discontinued in 2017. However unused Ontario tuition credit amounts accumulated before 2017 can be carried forward and used.

UFile steps if there is no transfer:

1. Add sections for T2202 and Canada Training Credit:

• In the Interview Setup, check the box for “student,” and click next.
• In the Tuition, education, student loans section, click the + next to:

• Canada Training Credit
• T2202 Tuition and Enrolment Certificate

2. Enter details of tuition certificate and unused amounts:

• Input the information from the T2202 slip, including boxes 24 and 25.
• Enter the unused tuition and education amounts (both federal and provincial). These can be found in the prior year’s Notice of Assessment, in My Account, or they should have been entered automatically if autofill was used.

3. Enter the Canada Training Credit (CTC) limit:

• Enter the unused CTC Limit.  This can be found in the prior year’s Notice of Assessment, in My Account, or they should have been entered automatically if autofill was used.

4. Review the results:

• UFile will generate Schedule 11 and calculate the claimable amount.
• Any unused balance will be listed in the Summary of carryforward amounts. 

UFile steps when amount is transferred to a parent or spouse:

Scenario 1 - Student and parent file at the clinic together:  

• UFile will automatically transfer any unused amount to the parent if the amount is usable by the parent.

Scenario 2 - Both spouses file at the clinic together:

• Ufile will automatically transfer any unused amount to the spouse if the amount is usable by the spouse.

Scenario 3 - Student files at the clinic, parent or spouse does not:  

• Enter the student’s T2202 T-slip details.
• Further down the screen, under the heading Transfer of current year unused amounts, select Transfer to Spouse or Transfer to Parent not processed.
• To transfer the maximum allowable amount, leave the transfer amount blank.
• Advise the student that the parent or spouse must also claim the transfer on their return, otherwise the transfer will not take effect.

Scenario 4 - Parent or spouse files at the clinic, student does not:  

• Request, or somehow determine, the amount being transferred by the student. Ideally, the parent or spouse will have the student’s T2202 with the back side completed.
• For a parent:

• In the section Tuition, education and textbook, click the + next to Tuition amount transferred from a child whose return is not processed with yours, and then complete the added section.

• For a spouse:

• Go to Spouse - basic information, and answer ‘yes’ to the question, Do you wish to claim Schedule 2 transfers from your spouse?
• Enter the tuition amount, and below that, answer the question, Does the CRA already have on your spouse or common-law partner account an approved Form T2201? Answer ‘yes’ if the student has already filed their tax return with Schedule 11.

For all scenarios:

• Ufile will generate a Schedule 11 for the student.
• Advise the student to complete and sign the back of the T2202. The CRA may later request a copy of the T2202.

UFile steps for professional or trade examination fees:

Unless a fee is charged as part of tuition, no tuition certificate will be issued for fees. There is no prescribed information slip or receipt for examination fees. After filing, the CRA could request a receipt to establish that the exam fee is eligible to be claimed. Below is the kind of receipt the CRA would expect to see:

Although examination fees are not “tuition” in the usual sense, the CRA treats them as tuition expenses for tax purposes. They must be reported on Schedule 11 and claimed on Line 32300 of the T1 return. If the fee qualifies, follow these steps in UFile:

1. In Interview setup, go to the Student section and check the box for Tuition.
2. Click the + next to T2202, even though no T2202 slip exists.

• Enter the examination fee amount in Box 26.
• In the description, indicate that the amount is an examination fee.

(Note: UFile does not have a dedicated entry option for exam fees, so this workaround must be used.)

What if there is no tuition certificate (T2202, TL11A or TL11C)?

The Income Tax Act and regulations do not explicitly prohibit claiming the tuition tax credit without a certificate. However, without one, convincing the CRA that the tuition fees qualify may be difficult.

The Income Tax Regulations require all designated educational institutions to issue a tuition certificate to any qualifying student enrolled at their institution.^[9] These terms and others are defined in the Income Tax Act.^[10] Because of this requirement, it is rare for someone to qualify for the credit yet not have a certificate.

That said, if a student has other records or evidence that demonstrate eligibility, the CRA should not deny the claim.^[11]

It is important to note that institutions are not required to issue tuition certificates for examination fees.

References:        

• Income Tax Act, s.118.5, s.118.6, s.188.61 (carryover), s.118.8 (transfer to spouse), s.118.81 (transfer to parent).
• Income Tax Folio S1-F2-C2, Tuition Tax Credit
• Guide P105, Students and Income Tax
• Schedule 11, Federal Tuition, Education and Textbook Amounts and Canada Training Credit