Students and their Parents Lose Ground the Term

Despite a CRA new release which tells students they will be saving more on their taxes this term, students and their parents will actually pay more tax in 2017 due to the March, 2016 budget.  Here are the details that students, parents and tax preparers need to know about as they spend money on their education in 2017:

Tax filing year 2016 will be the last one for students to earn the education and textbook tax credits.  For full-time students, these credits totaled $465 per month.  For a four-month term, that’s $1,860.

Translating that into real tax savings, the credits amount to $375 to $400 savings per term, depending on the province of residence.  So students who have more income than credits will pay about $100 a month more in taxes starting this (2017) term.  For student whose credits exceed their income, the loss of these credits will mean less credits available to transfer to their spouses or parents, resulting in the extra taxes being borne by the supporting persons.

For part-time students the credits were $140 per month in 2016 so, for 2017, part time students will see an increase of about $25 - $30 per month, depending on their province of residence.  Again, if these students have more credits than income, this tax increase will be passed on to their supporting persons.

Tax preparers should be discussing these consequences with their clients who are students or who are supporting students.  Tax refunds for 2017 will fall by as much as $800 for parents supporting a university student.

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