As students begin paying their tuition fees for the next fall semester, it’s important to know what fees and expenses can be deducted on this year’s tax return.
In last week’s column, I talked about things parents should consider when considering paying for their children’s post-secondary education. As a follow-up, this article will highlight some of the top deductions and credits that can help lower your family tax bill for the 2021 production year.
Moving expenses :
A full-time student may be able to claim the necessary expenses to relocate to the educational institution if they are at least 40 kilometers from the school. Moving expenses may include theft, rental of vehicles, and shipping of clothing and other goods to the establishment.
However, moving expenses can only be deducted from the taxable part of scholarships, scholarships, scholarships, research grants or other similar income. Moving expenses can be claimed whether the student is attending an institution in Canada or abroad.
It is important to ensure that receipts must be presented for the expenses claimed.
Interest paid on student loans:
To cover the costs of obtaining a post-secondary education, a student may need a loan to help pay for tuition and living expenses. It is important to compare the interest rate that will be charged, and the student should also consider the repayment terms and determine if the interest is deductible for tax purposes.
If the student takes out a loan under the Federal Student Loans Act, the Federal Student Financial Assistance Act, the Apprenticeship Loans Act or any provincial equivalent, the interest paid on the loan can be deducted from their taxes. These laws generally include most provincial and federal student loan programs; however, interest paid on private loans cannot be deducted from a student’s taxes.
Finally, the interest deduction can be deferred for up to five years, meaning that if the student’s income is not high enough to use the deduction, they can claim it for tax years up to 2025.
Tuition Fee Credit:
The student can use the tuition credit to reduce their taxes. Students attending a recognized Canadian educational institution or international university – full-time for at least 13 weeks – may be eligible for this credit.
The financial institution will distribute a T2202 slip dictating the total amount that can be claimed as tuition for the 2021 tax year.
Any unused tuition credits may be carried over or it may also be possible to transfer part of the credits. Students can choose to transfer their unused tuition deduction to their parents, grandparents or partner.
Good planning is important:
To help keep tuition down, it’s important that students (and their parents) know the credits and deductions that can be claimed when it comes to preparing their income tax return each year. A financial planner can help you and your child manage these expenses for college or university.