The cost of a post-secondary education is rising faster than the rate of inflation, making higher learning more of a stretch for Canadian students and their families. Here are three tax-saving strategies that can help fund a child’s education.
1. Save the Child Tax Benefit
The amount of Child Tax Benefit (CTB) received for each child will depend on the number of children in the family and the family net income each year, and can be quite significant. For example, over the 18 years that the family is eligible for the CTB, the total amount received can be more than $80,000 for a low-income family. If the CTB and any applicable provincial supplement are saved in a separate account in the name of the child, any income earned will be taxable to the child and will, therefore, usually not be subject to tax.
2. Claim child care expenses wisely
Costs of child care may be deductible for parents who go back to school or carry on research for which a grant was received. Expenses are deductible for the care of dependent children who were under the age of 16 (at any time during the year) or who are physically or mentally infirm. Full time students are limited to claiming the following:
* $125 for each child age seven to 16 for which the Disability Amount cannot be claimed, plus
* $200 per child under seven for which the Disability Amount cannot be claimed, plus
* $275 per disabled child
multiplied by the number of weeksof full-time attendance. Part-time students are limited to the above amounts multiplied by the number of monthsof part-time attendance.
3. Use tax advantages along the way
Tuition, education, and textbook expenses qualify for a non-refundable tax credit, which must be claimed by the student first to reduce taxes payable. If not taxable, the student may transfer this credit to a supporting individual. Other credits for students include the opportunity to deduct certain student-loan interest amounts.
Unfortunately, tuition fees and textbook expenses for primary or secondary school, including private school, are not deductible. However, tuition fees paid to schools that teach religion exclusively are considered to be a charitable donation if the school is a registered Canadian charitable organization that issues official charitable receipts. Certain schools operate in a dual capacity providing both secular and religious education. They may issue a charitable donation receipt for a portion of the fees paid under certain circumstances.
The tax system also allows for the deduction of student-loan interest, costs of public transit, and in some cases, moving expenses. To take advantage of these tax breaks it’s critical to keep all receipts through the year and all official slips issued by educational institutions.
Courtesy Fundata Canada Inc.© 2015. Evelyn Jacks is president of Knowledge Bureau. This article originally appeared in the Knowledge Bureau Report. Reprinted with permission. All rights reserved.
