Education and Textbook Tax Credits
Notice to the reader
This measure has received Royal Assent.
Budget 2016 proposes to eliminate the federal education and textbook tax credits effective January 1, 2017. This measure does not eliminate the tuition tax credit. Unused education and textbook credit amounts carried forward from years prior to 2017 will remain available to be claimed in 2017 and subsequent years.
Changes will be made to ensure that other income tax provisions – such as the tax exemption for scholarship, fellowship and bursary income – that currently rely on eligibility for the education tax credit or use terms defined for the purposes of the education tax credit will be unaffected by its elimination.
1. What are the education and textbook tax credits?
The education tax credit and the textbook tax credit are non-refundable tax credits that generally allow a student to claim an amount for each month in the year that they are enrolled in a qualifying educational program at a designated educational institution and certain criteria are met.
Unused credits can be transferred to the student’s spouse or common-law partner, or to their or their spouse’s or common-law partner’s parent or grandparent for the year, or carried forward to the first future year that the student would otherwise have to pay tax.
2. How are these credits changing?
Budget 2016 proposes to eliminate the federal education and textbook tax credits effective January 1, 2017. Unused education and textbook credit amounts carried forward from years prior to 2017 will remain available to be claimed in 2017 and subsequent years.
3. Can I still claim the tuition tax credit?
Yes, the federal tuition tax credit has not changed.
4. How will this change the T1 tax package?
Schedule 11, Tuition, Education, and Textbook Amounts will remain the same for the 2016 taxation year. For 2017 and subsequent taxation years, the calculation of the education and textbook amounts (based on the number of months indicated on forms T2202A, TL11A, TL11B and TL11C) will be removed. You will still be able to claim unused education and textbook credit amounts carried forward from prior years.
5. Will there still be an exemption for scholarship, fellowship and bursary income?
Yes. For 2017 and subsequent years, the budget proposes consequential changes to ensure the scholarship exemption remains unaffected by the elimination of the education tax credit. To claim the scholarship exemption, instead of having to qualify for the education tax credit in respect of the program, the student must be considered a qualifying student in respect of the program in the taxation year. The proposed definition of a qualifying student is based on the same criteria used to determine if an individual qualifies for the education tax credit under the existing rules.
6. Will educational institutions still need to provide the number of months of full-time and part-time enrolment?
Yes. The number of months of full-time and part-time enrolment may still be needed to calculate provincial/territorial tax credits.
As well, full-time and part-time enrolment in a particular program affects the eligibility for the exemption for scholarship, fellowship, and bursary income received for that program.
For these purposes, you will still need to obtain a tax certificate issued by the educational institution and report the number of months in full-time and part-time enrolment to the CRA.
7. Is the amount of tax deducted from my paycheque going to be affected?
In the Fall of 2016, the form TD1, Personal Tax Credits Return, will be updated for 2017 to remove the federal education and textbook tax credits. If you had previously claimed these amounts on a form TD1 that you provided to your current employer, you should complete and give them a new form for 2017.
8. How are the education and textbook tax credits currently calculated?
Currently, the full-time student education amount is $400 per month of enrolment and the part-time amount is $120 per month of enrolment.
The student can claim a textbook amount of $65 per month enrolled if eligible to claim the full-time education tax credit, and $20 per month if eligible to claim the part-time education tax credit.
The maximum education and textbook tax credits are calculated by multiplying the lowest personal income tax rate (15% in 2016) by the total of the education and textbook amounts. This means that the maximum tax credit that a student enrolled full-time for 8 months in the year may earn is $558 (that is, $465 x 8 months x 15%).
9. Where can I get more information on the proposed changes to the education and textbook tax credits?
The CRA is committed to providing taxpayers with up-to-date information. The CRA encourages taxpayers to check its webpages often. All new forms, policies, and guidelines will be posted as they become available.
In the meantime, please consult the Department of Finance Canada's Budget 2016 documents for details.
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