Educational allowances for children

If you pay any amounts to an employee as an educational allowance for the employee's child, you have to include these amounts in the employee's income for the year.

However, if the employee and their family have to live in a specific location away from their home and the schools in the area do not meet the educational needs of the employee's children, the educational allowance may not be taxable if all of the following conditions are met:

  • the education provided is in the official language of Canada primarily used by the employee
  • the school is the closest suitable one available in that official language
  • the child is in full-time attendance at the school
  • the subsidy you provide is reasonable

Do not include the GST/HST in the value of this allowance.

Payroll deductions

If the allowance is taxable, it is also pensionable and insurable. Deduct CPP contributions, EI premiums, and income tax.

Reporting the benefit

Report the taxable the benefit in box 14 "Employment income" and in the "Other information" area under code 40 at the bottom of the T4 slip. For more information, see T4 – Information for employers.

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