The Canadian tax system offers several tax credits aimed at supporting students with the financial burden of post-secondary education. Two of these credits, the education tax credit and the textbook tax credit, were repealed for taxation years after 2016. However, if you accumulated any unused credits from before 2017, you can still apply them to future taxation years. This article provides an overview of how these unused credits can still be utilized and the rules surrounding their application.
A Brief History of Education and Textbook Tax Credits
The education tax credit, introduced in 1997, allowed students to claim tax relief on the cost of post-secondary education. Similarly, the textbook tax credit was later added, for taxation years after 2005. However, in 2016, the Canadian government repealed these credits to simplify the tax system and make space for new benefits.
Despite being repealed, unused credits from previous years can still be carried forward. Section 118.61 of the Income Tax Act outlines how students can carry forward their tuition, textbook, and education credits. The amount of unused credit that can be applied in future years is determined by a specific formula that accounts for past unused credits and new eligible expenses.
How to Claim Your Unused Credits
Unused credits must be claimed by the student before they can be transferred to other eligible individuals, such as a spouse or parent. Notably, if credits were accumulated before 2017, they can no longer be transferred to anyone else—students must use them personally. This rule ensures that the credits directly benefit the individual who incurred the education costs.
The key point to remember is that students must use up their available credits to reduce their tax payable for the year before they can transfer any remaining amounts to a family member. The credits are applied against the student's tax liability first, and any remaining amounts can be carried forward.
Application of Unused Credits
The process of applying these credits is straightforward but requires careful calculation. You will need to refer to Schedule 11 of Form T1 General, where you calculate your unused credits at the end of the previous year, plus any additional credits for the current year. These credits are subtracted from your tax payable under Part I of the Income Tax Act.
For students who accumulated these credits before the 2017 repeal, this carryforward can provide ongoing tax relief even after they have left school.
Conclusion
While education and textbook tax credits are no longer available for new expenses, students who still have unused credits from previous years can continue to benefit from them. It is imperative that you apply these credits correctly and take advantage of the opportunity to reduce your tax burden, even years after completing your studies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.