We are officially into the fall season and students are fully immersed in their studies by now. Whether you’re a parent or post-secondary student, this is the first full school year affected by previously announced tax changes that we, your Kelowna accountants, spoke about in our article from June.
Unfortunately, the tax changes for students at all levels means higher after-tax costs for education-related expenses. For students enrolled in the public education system, there is no cost to attend school. Some public school kids are, however, enrolled in one or more after-school activities and almost all of these activities require out-of-pocket costs.
Depending on the activity, these costs can easily be covered or amount to several hundreds of dollars over the school year. Up until the recent tax changes, parents were able to offset these costs by claiming their children’s arts and sports activities.
Both credits were eliminated as of the 2017 tax year.
Parents must now budget on the basis that they will be paying the full cost and will not be claiming any offsetting tax credit on their tax return for 2017.
Kelowna accountants will tell you there is some good news. For parents of elementary school-aged children, costs that are incurred for after-school care, a deduction can still be claimed for such costs. This deduction is part of the general child care expense deduction and can be claimed, within limits, where child care costs are incurred in order for parents to work either at employment or self-employment.
The amount of deduction claimable depends on the age of the child and the actual amount expended. The Kelowna accountants at our office, Kerr & Company, are happy to go through the rules in claiming child care expenses. You can also find more information on the Canada Revenue Agency (CRA) website.
At the post-secondary education level, students and their parents have benefitted for many years from an “assist” through the Canadian tax system. This has provided deductions and credits for some of the many associated costs.
Again, two of those credits are no longer available to be claimed.
Tuition for post-secondary education is always the biggest cost. The tax credit provided for eligible tuition costs continues to be available for the upcoming academic and taxation year. Any student who incurs more than $100 in tuition at an eligible post-secondary institution can still claim a non-refundable federal tax credit of 15% of such tuition costs.
Equivalent provincial or territorial credits are also available. Talk to us, your Kelowna accountants at Kerr & Company, to find out what is available to you. At both the federal and provincial levels, the credit acts to reduce tax otherwise payable. Where a student doesn’t have tax payable for the year, as is often the case, any credits earned can be carried forward and claimed by the student in a future year, or transferred in the current year to a spouse, parent, or grandparent.
Post-secondary students have also been able to claim two other federal tax credits — the education tax credit and the textbook tax credit. These tax credits have both been eliminated. The only credit which will be claimable for the upcoming academic year is the non-refundable credit for 15% of tuition costs incurred.
If the education and textbook credits have been earned but not claimed in previous years, they are still available to be claimed by the student as carryover credits in 2017 or later years.
The CRA publishes a very useful guide to tax measures affecting students here. If you have questions regarding these tax changes and what you can and cannot claim, talk to Kerr & Company, your Kelowna accountants and experts.