Chapter History S1-F2-C2, Tuition Tax Credit

Introduction

The purpose of a Chapter History page is to highlight any amendments to the information contained in an interpretation bulletin that is now reflected in a chapter of an income tax folio as well as to identify any subsequent amendments to a folio chapter. It outlines amendments that have been made as a result of legislative changes and proposed legislative changes, precedential court decisions, as well as new or revised interpretations of the Canada Revenue Agency (CRA).

Except as otherwise noted, all statutory references herein are references to provisions of the Income Tax Act, R.S.C., 1985, c.1 (5th Supp.), as amended and all references to a Regulation are to the Income Tax Regulations, C.R.C., c. 945 as amended.

Update April 26, 2017

The Summary has been updated to reflect a change proposed in Budget 2017 regarding the eligibility criteria for the tuition tax credit.

¶2.13 has been updated to reflect a revised correspondence address for institutions requesting to be added to the list of universities outside Canada.

¶2.30 has been updated by adding the sentence “This reflects the fees for the four months from September to December and the fees for the four months from January to April of the subsequent year.” This clarifies the example for allocating fees paid in a year that are for courses taken in two calendar years when determining a tuition tax credit in a year. 

¶2.46, 2.50, 2.51, 2.52, 2.55, 2.56, and 2.57 have been revised to reflect the elimination of the education and textbook tax credits, effective for the 2017 and subsequent tax years. The elimination of these credits impacts the amount of credit that a student can carry forward (under subsection 118.61(2)), transfer to a parent or grandparent (under section 118.9) or transfer to a spouse (under section 118.8).

¶2.50, ¶2.55 and ¶2.57 have been revised to remove references to the children’s fitness tax credit in section 118.03 which was repealed by S.C. 2014, c.39, s.32 (formerly Bill C-43), effective for the 2015 and subsequent tax years as noted in the history note dated March 12, 2015. For most taxpayers, this credit is no longer relevant to the calculation of the carry-forward and transfer amounts. 

Updates have been made to the Notes in the formulas found in ¶2.50, ¶2.55 and ¶2.57 to identify that various changes have occurred to the credits listed in each formula. As there have been differing years of enactment and repeal for a number of the tax credits identified in these formulas, the note identifies that the legislation in place for the year that the formula is being calculated should be consulted.   

Specific tax years were added back into Example 1 (¶2.51 and 2.52) and Example 2 (¶2.56) to demonstrate how the elimination of the education and textbook tax credits impacts an individual’s ability to carry-forward or transfer certain credits.

Update June 21, 2016

¶2.2, 2.51, 2.52 and 2.56 have been revised to remove references to a specific tax year so the information is more broad-based.

Update December 22, 2015

¶2.60 of the English version has been revised to add the phrase “of the student’s grandfather or grandmother” to the end of the second bullet.  The phrase was mistakenly omitted from the original English version.

Update November 24, 2015

Minor changes have been made to improve the usability of the income tax folios:

  • the Summary section has been moved to the top of each folio chapter to be more immediately visible and helpful to readers;
  • the Application and Reference sections have been moved to the end of the Chapter which is more appropriate for administrative content of this nature. However, these sections now appear in the Table of contents for easy access;
  • the statement that folios are only available in electronic format has been moved to the end of the Application section; and

the words “as promulgated under the Act” in connection with the Income Tax Regulations have been removed from the Application section, in the interest of using plain language.

Update March 12, 2015

¶2.50, 2.55 and 2.57 have been updated to note a legislative amendment to repeal section 118.03 (non-refundable children’s fitness tax credit), made by S.C. 2014, c.39, s.32 (formerly Bill C-43), effective for the 2015 and subsequent tax years.

Update September 12, 2014

¶2.50 has been updated at the description of variable C to reflect a legislative amendment to section 118.61 which now incorporates section 118.07, made by S.C. 2014, c.20 (formerly Bill C-31), effective for the 2014 and subsequent tax years.

¶2.55 has been updated at the description of variable B to reflect a legislative amendment to section 118.81 which now incorporates section 118.07, made by S.C. 2014, c.20, effective for the 2014 and subsequent tax years.

¶2.57 has been updated at the description of variable C to reflect a legislative amendment to section 118.8 which now incorporates section 118.07, made by S.C. 2014, c.20, effective for the 2014 and subsequent tax years.

Update March 11, 2014

¶2.37 is revised to reflect a legislative amendment to subparagraph 118.5(3)(c)(iv), made by S.C. 2013, c. 40, s. 50(1), applicable to the 2012 and subsequent tax years, which clarifies that ancillary fees and charges paid in respect of financial assistance are not eligible tuition fees except to the extent that the amount of the assistance is required to be included in computing the income of the individual or would be required to be included but for the scholarship exemption in subsection 56(3).

¶2.44 is revised to maintain consistency with respect to our interpretation on subparagraph 118.5(3)(c)(iv) provided in  ¶ 2.37, which deals with ancillary fees and charges imposed by an educational institution in respect of financial assistance. Paragraph 118.5(4)(b), added by S.C. 2011, c. 24, s. 29(5), applicable to the 2011 and subsequent tax years, also clarifies that ancillary examination fees and charges paid to a professional association, provincial ministry or other similar institution in respect of financial assistance are not eligible for the tuition tax credit except to the extent that the amount of the assistance is required to be included in computing the income of the individual or would be required to be included but for the scholarship exemption in subsection 56(3).

¶2.63 has been updated to remove the reference to Form T2202, which was cancelled.  The content of Form T2202 is now reflected in a revised Form T2202A.

Update January 23, 2014

Throughout the French version of the Chapter and its Chapter History, general revisions have been made to improve readability. The following changes have also been made to the Chapter.

Throughout the Chapter, the references to the Minister or Department of Human Resources and Skills Development Canada (HRSDC) have been changed to the Department of Employment and Social Development (ESD), to reflect the legislative amendments made by S.C. 2013, c.40 (formerly Bill C-4), s. 237 and 238. These references are made in the Chapter in connection with the certification of an institution for purposes of subparagraph 118.5(1)(a)(ii). In addition, the French version of the Chapter has been amended to remove the references to a “bourse d’entretien”. Although the English version of the Act uses two separate expressions for “scholarship” and “bursary”, the French version of the Act uses the general expression “bourse d’études” to describe both concepts. The change has been made to ensure that the French version of the Chapter reflects the wording of the legislation.

¶2.2 has been updated to clarify that fees for certain occupational, trade and professional examinations under paragraph 118.5(1)(d) are included in determining the amount of the tuition tax credit. 

¶2.7 has been amended at item (b) to revise and to or at the end of the condition described in item (i), in accordance with clause 118.5(1)(a)(ii.2)(A).   The paragraph has also been updated at item (c) to reflect the amendment to subparagraph 118.5(1)(a)(iii), amended by S.C. 2013, c.34 (formerly Bill C-48), s. 251, effective June 26, 2013.  This amendment clarified that fees reimbursed to an individual by their employer are not eligible for the credit. Information concerning the proposed legislative change has also been removed.

¶2.10 has been amended at item (a) to clarify that each course must satisfy the duration requirement and at item (b) to remove the duplicate reference to the residency requirement which is separately stated in condition (i) of this item.  

¶2.25 has been amended to clarify that it is the tuition fees paid from an award received by a student from the student’s employer which may be eligible for the tuition tax credit.

¶2.37 has been amended to clarify that ancillary fees and charges paid to an educational institution referred to in subparagraph 118.5(1)(a)(ii), or paragraphs 118.5(1)(b) or 118.5(1)(c) are not eligible for the tuition tax credit.

¶2.50 has been updated at the description of variable C to reflect a legislative amendment to section 118.7, made by S.C. 2013, c.34 (formerly Bill C-48), s. 253(1), effective for the 2006 and subsequent tax years. The amendment follows the introduction of the new Quebec Parental Insurance Plan on January 1, 2006.  ¶2.55 has been updated at the description of variable B and ¶2.57 has been updated at the description of variable C to also reflect this legislative amendment to section 118.7. In addition, the word or has been added between the words spouse and common-law partner in variable E.

Update March 28, 2013

General

Income Tax Folio S1-F2-C2, Tuition Tax Credit, replaces and cancels Interpretation Bulletin IT–516R2, Tuition Tax Credit concerning a student's eligibility to claim or transfer a tuition tax credit.

In addition to consolidating the content of the former interpretation bulletin, general revisions have been made to improve readability. Any substantive technical and interpretive changes to the information outlined in the former interpretation bulletin are described below. Except as otherwise noted, all statutory references herein are references to provisions of the Income Tax Act, R.S.C., 1985, c.1 (5th Supp.), as amended.

Legislative and other changes

Throughout the Chapter, the references to the Minister or Department of Human Resources Development Canada have been changed to Human Resources and Skills Development Canada (HRSDC). These references are made in the chapter in connection with the certification of an institution for purposes of subparagraph 118.5(1)(a)(ii). Throughout the Chapter, all references to spouse have also been changed to spouse and common-law partner based on the 2000 same-sex partner bill.

¶2.1 has been added to highlight the four distinct provisions within subsection 118.5(1) in relation to the tuition tax credit; educational institutions in Canada (paragraphs 118.5(1)(a)), universities outside of Canada (paragraph 118.5(1)(b)), educational institutions in the United States near the Canadian-United States border (paragraph 118.5(1)(c)) and fees in respect of occupational, trade or professional examinations (paragraph 118.5(1)(d)).

¶2.2 (formerly included in ¶1 of IT-516R2) has been updated to reflect the current lowest tax rate percentage of 15% and an updated numerical example.

¶2.5 (formerly included in ¶3 of IT-516R2) has been updated at item (a) to clarify what could be considered a college or university for purposes of subparagraph 118.5(1)(a)(i). Item (b) has been updated to clarify the meaning of the term professional organization for purposes of determining whether an organization would be considered an other educational institution pursuant to paragraph 118.5(1)(a). Item (d) has been updated to reflect the change in the name of the Quebec statute under which financial assistance is provided to students. References to tax services offices in former ¶3, 4, and 6 of IT-516R2 have been removed as the tax services offices no longer provide these services. The general enquiries line or other relevant phone numbers have been included where applicable.

2.6 (formerly included in ¶4 of IT-516R2) has been updated to reflect the new address for the Minister of HRSDC where institutions may direct enquiries concerning certification requirements.

¶2.7 (formerly included in 8 of IT-516R2), has been updated to include items (a) and (b) to the list of exclusions provided in subparagraph 118.5(1)(a)(ii.1) and (ii.2). A proposed legislative change to subparagraph 118.5(1)(a)(iii) is noted under item (c). Item (f) has been added to reflect the enactment of subparagraph 118.5(1)(a)(v), added by 1998, c. 19, s. 135(1), applicable to the 1994 and subsequent tax years. The proposed changes of June 26, 1996 formerly noted in ¶8 have been deleted.

¶2.8 (formerly included in 8 of IT-516R2), now includes a discussion of academic upgrading courses.

¶2.9 (formerly included in 8 of IT-516R2), has been revised to explain the CRA’s position regarding the meaning of occupation and English or French second language training at an HRSDC-certified institution for the purposes of the tuition tax credit.

2.10 (formerly included in ¶9 of IT-516R2) has been updated at item (a) to reflect the amendment to subparagraph 118.5(1)(b)(i) amended by 2011, c. 24, s. 29(2), applicable to tuition fees paid for the 2011 and subsequent tax years.

2.12 (formerly included in ¶10 of IT-516R2) clarifies the meaning of the term university for purposes of determining whether a foreign educational institution would be considered a university pursuant to paragraph 118.5(1)(b).

2.13 (formerly included in ¶6 of IT-516R2) has been updated to reflect the new address to which enquiries should be sent for consideration as a university outside Canada.

¶2.15 (formerly included in ¶7 of IT-516R2) has been revised to clarify the meaning of commute for purposes of paragraph 118.5(1)(c).

¶2.16 has been added to provide references to other CRA publications relevant to students attending universities outside Canada.

¶2.19 has been added to explain the CRA’s position regarding online attendance for purposes of the requirement for full-time attendance in paragraph 118.5(1)(b).

¶2.20 has been added to explain the CRA’s position regarding correspondence courses for purposes of the requirement for full-time attendance in paragraph 118.5(1)(b).

¶2.22 (formerly included in ¶13 of IT-516R2) has been revised to include the meaning of enrolled for purposes of paragraph 118.5(1)(a) and (c).

¶2.23 - 2.25 (formerly included in ¶16 and 17 of IT-516R2) have been amended to clarify whether a student in receipt of a scholarship, fellowship, bursary or prize may claim a tuition tax credit in respect of the student’s tuition.

¶2.26 has been added to address whether a student may claim the tuition tax credit where the student’s tuition fees are paid by the employer of the student’s family member.

¶2.28 has been added to provide an example of when a tuition tax credit would not be available pursuant to subparagraph 118.5(1)(a)(iii.1) or (v).

¶2.29 (formerly included in ¶14 of IT-516R2) now makes reference to the student’s ability to carry forward unused tuition amounts to be used in future years, pursuant to subsection 118.61(1), added by 1998, c. 19, s. 28(1), applicable to the 1997 and subsequent tax years.

¶2.31 (formerly included in ¶24 of IT-516R2) has been updated to reflect the amendment to subparagraph 118.5(1)(b)(i), amended by 2011, c. 24, s. 29(2), applicable to tuition fees paid for the 2011 and subsequent tax years.

¶2.36 and 2.37 have been added further to the introduction of subsection 118.5(3), concerning ancillary fees and charges. Subsection 118.5(3) was added by 1998, c. 19, s. 26(1), applicable to the 1997 and subsequent tax years.

¶2.38 (formerly included in ¶29 of IT-516R2), has been reworded to clarify the CRA’s position on tuition fees paid to certified flight training schools for purposes of solo flying time. In addition, this paragraph has been revised to reflect the name change of the Department of Transport to Transport Canada and to remove the list of licences and ratings.

¶2.40 - 2.42 have been added further to the introduction of paragraph 118.5(1)(d) concerning fees paid in respect of occupational, trade, or professional examinations. Paragraph 118.5(1)(d) was added by 2011, c. 24. s, 29(3), applicable to the 2011 and subsequent tax years.

¶2.43 - 2.45 have been added further to the introduction of subsection 118.5(4), concerning ancillary fees and charges for examinations. Subsection 118.5(4) was added by 2011, c. 24, s. 29(5), applicable to the 2011 and subsequent tax years.

¶2.46 - 2.52 have been added further to the introduction of subsections 118.61(1) and (2) concerning the carry forward of unused tuition, education and textbook tax credits. An example has been provided for additional clarity. Subsections 118.61(1) and (2) were added by 1998, c. 19, s. 28(1), applicable to the 1997 and subsequent tax years.

¶2.53 has been added further to the introduction of subsection 118.61(4) concerning the calculation of the unused tuition, education and textbook tax credits available for carry forward where there is a change in the lowest tax rate percentage. Subsection 118.61(4) was added by 2006, c. 4, s. 65(3), applicable to the 2005 and subsequent tax years.

¶2.54 has been added to provide CRA’s position concerning the transfer or carry forward of tuition tax credits by non-residents of Canada.

¶2.55 and 2.56 (formerly included in ¶18 of IT-516R2), have been revised and an example provided for additional clarity. Revisions have been made to the variables with respect to the calculation of amounts that may be transferred by a student under section 118.81 to a spouse or common-law partner or a parent or grandparent. In addition, the reference to subsection 252(4) has been removed as this subsection was repealed by the 2000 same-sex partner bill effective for 2001 and later tax years.

¶2.57 discusses the revisions that were made to the formula in respect of calculating the actual amount that may be claimed by the spouse or common-law partner under section 118.8.

¶2.59 (formerly included in ¶20 of IT-516R2), has updated references to sections of the Act. In addition, readers are referred to ¶2.55 to determine the amount that may be transferred to a parent or grandparent under section 118.9.

¶2.61 (formerly included in ¶21 of IT-516R2), has also been revised to remove the reference to subsection 252(4), pursuant to its repeal by the 2000 same-sex partner bill effective for 2001 and later tax years.

¶2.63 (formerly included in ¶30 of IT-516R2), has been revised to consolidate in one area of the chapter all of the forms currently relevant to the tuition tax credit or the transfer of the tuition, education and textbook tax credits. Additionally, information in former ¶33 of IT-516R2 has been updated and moved to ¶2.64.

¶2.68 has been added to provide information regarding receipting requirements to substantiate occupational, trade, or professional examination fees.

 

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