Claim Tuition Fees as a Deduction, Credit or Canada Training Credit

Walter Harder & Evelyn Jacks

Taking a Knowledge Bureau certificate course this year?  It will be tax deductible as a training expense if you are self-employed.  But there may also be an opportunity for you to tap into a $1,000 Canada Training Credit if you are claiming the tuition fee credit.  For those who qualified in 2022, the amount was $750.  Here’s what you need to know:

Starting in 2020, most taxpayers between the ages of 25 and 65 began earning an entitlement to the Canada Training Credit of $500 per year.   In order to claim this refundable tax  credit, the taxpayer has to have eligible tuition fees for the year. It's important to understand how the two credits – the non-refundable tuition fee amount and the refundable CTC work together.  

The Tuition Fee Amount.  If you’re claiming the tuition credit, you receive a non-refundable credit for 15% (federally) of your tuition claim.  The provincial tax returns will have their own rules surrounding this claim for a combined benefit that’s bigger, depending on where you live.  

If you don’t need the credit to bring your non-refundable credits up to the same level as your taxable income, the unused tuition may be transferred (at least in part) to your spouse or other supporting individual up to a maximum of $5000 . If you don’t have anyone to transfer the tuition to (or wish not to transfer), the unused tuition may be carried forward to be used in a future year.  The bottom line is that you’ll get a credit for about 25% of your tuition, depending on your province of residence, but you’ll never get a refund from claiming tuition. Hence, its category:  a non-refundable tax credit.

Knowledge Bureau students can access the T2202 Form required to justify their claims for the tuition fee credit by logging in to their virtual campus.  For assistance, please call 1-866-953-4769. The Canada Training Credit.  If you have both tuition fees and a Canada Training Credit entitlement, you can claim a refundable credit for the lesser of one-half of your tuition and your Canada Training Credit entitlement, plus you can claim the rest of your tuition if you need it. To claim the CTC you must be:

• Between ages 25 and 64
• Earn at least $10,342 in 2022 from employment, self-employment or taxable scholarships
• Have taxable income of no more than upper limit of 3^rd tax bracket ($155,625 in 2022)

Here’s an example:

In 2023, Sasha, who lives in Ontario, had employment income of $20,000 and $4,500 in eligible tuition.  Her 2022 Notice of Assessment shows she has $1,000 available to claim under the Canada Training Credit. 

If Sasha does not claim the Canada Training Credit, she’ll need just over $3000 of her tuition to reduce her taxes.  The remaining $1,500 can be transferred to a supporting person or carried forward.   She’ll have a refund of about $4,400 based on her income tax deducted at source, a Canada Workers Benefit of about $1,400 and her Ontario Jobs Training Credit of $2,000.

If Sasha claims the Canada Training Credit, that credit will be limited to $2,250 (50% of her tuition) and her available Canada Training credit entitlement ($1,000). 

Her available tuition will be reduced by the $1,000 claim, but she’ll still have about $500 unused tuition to transfer or carry forward. 

By simply choosing to claim the Canada Training Credit, Sasha’s refund increased by $1,000.  The only cost of this is the reduction in her available balance of the  Canada Training Credit and the tuition available to transfer or carry forward, which is reduced by the $1,000 Canada Training Credit claimed. 

Bottom Line:  Since the dollar value of the Canada Training Credit does not change from year to year (other than inflation reducing the buying power to the resulting refund), students who have tuition and a Canada Training Credit entitlement are always better off if they claim the Canada Training Credit as soon as they can.

Advisors and their clients would be well advised to review prior tuition claims to maximize after-tax results and see whether claiming the CTC will improve after-tax cash flow this year.