Tuition or Canada Training Credit?

Walter Harder

Starting in 2020, most taxpayers between the age of 25 and 65 began earning an entitlement to the Canada Training Credit of $500 per year. In order to claim the credit, the taxpayer has to have eligible tuition fees for the year. So, what’s the difference between claiming the tuition credit and the Canada Training Credit?

If you’re claiming the tuition credit, you receive a non-refundable credit for 15% (federally) of your tuition claim.  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.  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 20 to 25% of your tuition, but you’ll never get a refund from claiming tuition.

However, if you have both tuition 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.

Here’s an example:

In 2022, Sasha, who lives in Ontario, had employment income of $20,000 and $4,500 eligible tuition.  Her 2021 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.  Her refund, though, increases to over $5,400 based on her income tax deducted at source, a Canada Workers Benefit of about $1,400, a Canada Training Credit of $1,000 and her Ontario Jobs Training Credit of $2,000.

By simply choosing to claim the Canada Training Credit, Sasha’s refund increased by $1,000.  The only cost of this is that the $1,000 Canada Training Credit used in 2022 will not be available for use in future years, and the tuition available to transfer or carry forward is reduced by the $1,000 Canada Training Credit. 

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.

The Next Steps:  Advisors and clients would be well advised to review prior tuition claims to maximize after-tax results.