If you have a student in the family attending post-secondary school, no doubt this may be a unique fall. While some students have left town to attend school in person, many are staying home for a semester of online learning.
For parents or grandparents, here are some reminders of the tax benefits available for students to help soften the ever- increasing cost of higher education.
RESP — Hopefully you already have a Registered Education Savings Plan (RESP) in place. We mention the RESP on a regular basis because we feel it is important for families. From a tax perspective, the RESP provides the opportunity for compounded growth over time while deferring taxes. As well, there are other meaningful benefits. If certain conditions are met, the federal government’s Canada Education Savings Grant (CESG) is worth up to $500 per year per student beneficiary to a lifetime maximum of $7,200. RESPs also encourage disciplined saving. If you don’t have a RESP for members of your family, please get in touch. Beyond the importance of saving to support a student’s education, you should keep good records to take advantage of tax benefits. As a result of the pandemic, students who received the Canada Emergency Student Benefit (CESB) from May to August should note that the CESB is considered taxable income. As such, they will receive a T4A tax slip for the amount received.
Tuition Tax Credit — The federal government provides this non-refundable credit worth 15 percent of the amount of tuition fees, with no maximum. Provincial credits are also available. If a student doesn’t have sufficient income to use the credits in the year of attendance, a credit for up to $5,000 of tuition fees can be transferred to a spouse/common-law partner, or to parents or grandparents. Any remaining tuition amount can be carried forward for use by the student in a future year.
Moving Expenses — While this may not be applicable this semester, moving costs may be deductible. For students attending post-secondary programs at least 40 km from home, these expenses may be deducted from scholarships or grants required to be included in income. Depending on the circumstances, certain moving expenses may also be deductible against income from a summer job.
The views expressed are those of Wes Ashton, Director of Growth Strategy and Portfolio Manager, and not necessarily those of Harbourfront Wealth Management Inc., a member of the Canadian Investor Protection Fund.