Tax tips for parents and students

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For many Canadians, the tax savings start at home with family credits and deductions. In most cases, just being married or in a common-law relationship can have a significant impact on how you are taxed.

Some notable tax breaks come into play if you have children. These come in the form of a childcare expense deduction on your tax return and payments through the Canada Child Benefit. And in some cases, parents can deduct tuition and possibly other post-secondary costs.

Childcare costs

You can deduct child care, nanny hire and other child care expenses if they were incurred to enable you as a parent to work or go to school . You can claim $8,000 for each child under age 7 and $5,000 for each child between the ages of 7 and 16. Disabled children of any age provide a credit of $11,000, as long as their situation qualifies for the disability tax credit.

Eligible child care expenses include babysitters (nannies), day care services, day camps, and to some extent, overnight camps and boarding schools. Note that:

  • In a two-parent family (including situations where the parents live apart but have shared custody), child care expenses must be claimed by the parent with the lower income. Single parents can deduct expenses from their own income.
  • The expenses you can deduct are limited to two-thirds of the earned income of the lower-income spouse or single parent. “Earned income” is largely equal to your employment income; this is the same amount on which you base your annual RRSP contribution.
  • The deduction is based on when the services are provided, not when the payment is made. So if you prepaid last December for 2022 services, you cannot claim that amount on your 2021 tax return.
  • The deductibility of boarding and overnight camp expenses is subject to complex restrictions, starting with $200 per week for a child under age 7, $125 for a child 7 to 16, and $275 for a disabled child of any age, as defined above.

Canada child benefit

In addition to deducting eligible child care expenses, parents of children under 18 can also apply for the Canada Child Benefit. These are non-taxable monthly payments for an annual total, in most cases, of $6,833 per child under age 6 and $5,765 for children age 6 to 17. The parental eligibility rules are similar to those for the child care expense deduction.

Families with a combined net income of less than $32,028 receive the maximum amount. Payments are progressively lower for those whose net income is above this level. Parents of disabled children may receive a higher amount. Payment amounts and income thresholds are adjusted on July 1 of each year.

For detailed information on the Canada Child Benefit, visit the CRA website.

Quebec has a similar parental assistance program called the Quebec Family Allowance, with somewhat different qualifications. Details are available on the Retraite Québec website.

Adoption expense credit

Expenses incurred to adopt a child qualify for a 15% non-refundable federal tax credit. The maximum amount that can be claimed for 2021 is $16,729 per adoption. Eligible costs include agency fees, legal fees, travel, translation and any fees charged by foreign countries or institutions. A claim can only be made on the tax return for the year in which the adoption is finalized, but you can also include expenses incurred in previous years related to the adoption. Quebec offers a refundable tax credit for adoption expenses.

Post-secondary tuition fees

Fees paid for courses at a Canadian university, college or other post-secondary institution are eligible for a 15% federal non-refundable tax credit (8% for Quebec tax purposes). This credit must first be claimed by the student; however, a parent can claim some or all of the amount of the credit that the student cannot use once their taxable income has been reduced to zero through the use of various credits and deductions. Tuition not used for credit by the student may be transferred to a parent or grandparent (but this is limited to a maximum credit of $750). Alternatively, the student can carry forward the amount of any unused credit to use on one of their future year tax returns (these amounts cannot be claimed in a future year by a parent/grandparent ).

Fees eligible for the federal tax credit include tuition, admission, library and lab use and supplies, mandatory computer service fees, and certificate or degree fees. Textbooks are not eligible unless included in the cost of a correspondence course. Note that textbook expenses incurred before 2017 are eligible, assuming they have not yet been claimed on a previous tax return. Although student association fees do not qualify for this credit, mandatory fees for services such as health care, sports, and other things may be claimed.

Although high school tuition is not deductible, certain advanced placement programs, such as those offered in grade 12 by some private schools in Quebec, may qualify.

Canada training credit

In addition, vocational training courses eligible for the Canada training credit are eligible for a refundable federal credit of 15%. To qualify for a tax credit for 2021, you must be 25 or older and under 65 at the end of 2020, with income in 2020 of at least $10,100 but no more than $150,473.

Fees paid for courses and examinations for courses required to obtain a professional designation or to obtain a license for a profession or trade may be claimed under this credit. For other requirements and restrictions, visit the CRA website.

Other education-related credits and exemptions

The following should also be considered by post-secondary students:

  • Interest paid on student loans can be appeased as a tax credit if the loan was issued under the Federal Student Loans Act or an equivalent program. Interest paid in the previous five years can be claimed, and any unclaimed interest for the current year can be carried forward as an eligible credit for five years.
  • Income received in the form of scholarships or bursaries is tax-exempt as long as it relates to a qualifying full-time program and may also include a scholarship or bursary to attend secondary or elementary school . Postdoctoral fellowships are not eligible.
  • Students can access their Registered Retirement Savings Plan (RRSP) to help cover education costs under the Lifelong Learning Plan. Up to $10,000 per year can be withdrawn without penalty over four years, to a maximum of $20,000. Amounts withdrawn are to be repaid in equal installments over 10 years, beginning approximately five years after the original withdrawal date.
  • Moving expenses may be deducted from income if the student moves more than 40 kilometers to attend a post-secondary school as a full-time student (in Canada or elsewhere), or if the student moves to start a job (including including a summer job) or to start a business.
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