Income Tax Folio

S1-F2-C1: Education and Textbook Tax Credits

Series 1: Individuals

Folio 2: Students

Chapter 1: Education and Textbook Tax Credits

The Canada Revenue Agency (CRA) issues income tax folios to provide technical interpretations and positions regarding certain provisions contained in income tax law. Due to their technical nature, folios are used primarily by tax specialists and other individuals who have an interest in tax matters. While the comments in a particular paragraph in a folio may relate to provisions of the law in force at the time they were made, such comments are not a substitute for the law. The reader should, therefore, consider such comments in light of the relevant provisions of the law in force for the particular tax year being considered.

Income tax folios are available in electronic format only.

Application

This updated Chapter, which may be referenced as S1-F2-C1, is effective March 11, 2014.

When it was first published on March 28, 2013, this Chapter replaced and cancelled Interpretation Bulletin IT–515R2, Education Tax Credit.

The history of updates to this Chapter as well as any technical updates from the cancelled interpretation bulletin can be viewed in the Chapter History page.

Except as otherwise noted, all statutory references herein are references to the provisions of the Income Tax Act R.S.C., 1985, c.1 (5th Supp.), as amended and all references to a Regulation are to the Income Tax Regulations, C.R.C., c. 945, as amended and as promulgated under the Act.

Links to jurisprudence are provided through CanLII.

Reference

Section 118.6 (also sections 118.61, 118.8, and 118.9), subsections 5(1), 6(3), 117(2), 56(3), and paragraph 56(1)(n).

Summary

A student may be entitled to claim an education tax credit and a textbook tax credit, which are non-refundable tax credits, in calculating Part I tax otherwise payable. The purpose of these tax credits is to recognize non-tuition related costs of post-secondary education. The education tax credit is provided to assist students in reducing their income tax by reference to the number of months that the student is enrolled full-time in a qualifying educational program or part-time in a specified educational program at a designated educational institution. The student must obtain an authorized certificate from the educational institution which confirms the student’s enrolment. For each month that a student is able to claim an education amount, the student may claim a textbook amount. Subject to certain requirements and limitations, the unused portion of the student’s education and textbook tax credits may be carried forward by the student to future years or transferred to the student’s spouse or common-law partner, or to a parent or grandparent of either the student or the student’s spouse or common-law partner.

This Chapter provides the reader with an extensive review of the legislation and related provisions concerning the education and textbook tax credits and is intended for readers who have a general understanding of the Act. Individuals seeking a less technical overview of the legislation pertaining to students and the education and textbook tax credits may prefer to first review Pamphlet P105 – Students and Income Tax, the Students information page or the Video Series – Canadian students and income tax on the CRA website. For information concerning the deductibility of moving expenses, see Interpretation Bulletin IT-178R3, Moving Expenses.

Table of contents


Discussion and interpretation

General overview

1.1 Subsection 118.6(2) authorizes a student to claim an education tax credit determined by formula for each month in the calendar year during which the student is enrolled (see ¶ 1.25 - 1.28 for a discussion of full-time and part-time enrolment) at a designated educational institution either in a specified educational program that provides that a student spend not less than 12 hours per month on courses in the program or as a full-time student in a qualifying educational program. For 2006 and subsequent years, subsection 118.6(2.1) authorizes a student to claim a textbook tax credit determined by formula for each month in which the student is able to claim an education tax credit.

Carrying forward or transferring credits

1.2 Certain of a student’s unused tax credits for the year, including the education and textbook tax credits, may be carried forward to future years to be used by the student under section 118.61. Alternatively, these unused credits may be transferred to, and claimed as a tax credit by, the student’s spouse or common-law partner, under section 118.8, or a parent or grandparent of either the student or the student’s spouse or common-law partner, under section 118.9. See Income Tax Folio S1-F2-C2, Tuition Tax Credit, for a detailed discussion of both of these options with respect to a student’s unused tuition, education and textbook tax credits.

Authorized certificate

1.3 In all cases where an education and textbook tax credit or a transfer of the education and textbook tax credit is claimed, the student must obtain a certificate containing prescribed information from the designated educational institution as proof of enrolment. See ¶ 1.32 for further information regarding authorized certificates.

The formula

Determining amount of the credit

1.4 The amount of the education tax credit is determined by multiplying the lowest tax rate percentage referred to in subsection 117(2) (15% for years after 2006) by $400 for months of full-time study during which the student is enrolled in a qualifying educational program or $120 for months of part-time study during which the student is enrolled in a specified educational program at a designated educational institution. Either the full-time education amount or the part-time education amount may be claimed in respect of a month, but both amounts may not be claimed for the same month. The textbook tax credit is determined by multiplying the lowest tax rate percentage by $65 for full-time students and $20 for part-time students by the same number of months for which the student is able to claim the education tax credit as either a full-time or part-time student.

Months without formal instruction or classroom activity

1.5 If mandatory final examinations are taken in a month when there is no formal instruction or classroom activity, that month may qualify for inclusion in the formula provided the examinations are an integral part of the course of study and the other legislative requirements of subsection 118.6(2) and (2.1) have been met. The calculation of the number of months in a calendar year during which a student is enrolled at a designated educational institution may include the months in which a course starts and ends.

 

Example

 

1.6 If a student were enrolled as a full-time student in a qualifying educational program for 8 months of the 2012 calendar year, the student would be entitled to an education tax credit of $480 ($400 x 8 x 15%) and a textbook tax credit of $78 ($65 x 8 x 15%) for the 2012 tax year. The education tax credit would be claimed by completing Schedule 11 of the student’s income tax return. For more information on how to report tuition, education and text book amounts in a student’s income tax return, see Line 323 – Your tuition, education, and textbook amounts.

Persons with disabilities

1.7 Pursuant to subsection 118.6(3), a part-time student in a qualifying educational program at a designated educational institution is eligible for the full-time education and textbook tax credit of $400 and $65 respectively per month of study, if the student:

  • is eligible for the disability tax credit for the year pursuant to section 118.3; or
  • has, in the year, a mental or physical impairment and a medical doctor or a specified individual has certified in writing that the effects of the impairment are such that the student cannot reasonably be expected to be enrolled as a full-time student while so impaired

1.8 For this purpose, a specified individual means:

  • an optometrist, where the student has a visual impairment;
  • a speech-language pathologist, where the student has a speech impairment;
  • an audiologist, where the student has a hearing impairment;
  • an occupational therapist, where the student has an impairment with respect to feeding or dressing himself or herself;
  • an occupational therapist or a physiotherapist where the student has an impairment with respect to walking; or
  • a psychologist, where the student has an impairment with respect to mental functions for everyday life within the meaning of subparagraph 118.4(1)(c.1) (memory, problem solving, goal-setting and judgment, and adaptive functioning).

For information on eligibility for the disability tax credit, see Income Tax Folio S1-F1-C2, Disability Tax Credit.

Designated educational institution

Definition of designated educational institution

1.9 A designated educational institution is defined in subsection 118.6(1) to be any of the following:

a) a university, college or other educational institution designated by the lieutenant governor in council of a province as a specified educational institution under the Canada Student Loans Act, designated by an appropriate authority under the Canada Student Financial Assistance Act, or designated, for the purposes of An Act respecting financial assistance for education expenses, R.S.Q, c. A-13.3, by the Minister of the Province of Quebec responsible for the administration of that Act;

b) an educational institution in Canada that is certified by the Minister of Employment and Social Development Canada (ESDC) to be an educational institution providing courses, other than courses designed for university credit, that furnish a person with skills for, or improve a person’s skills in, an occupation;

c) a university outside Canada at which the student for whom the education tax credit is determined is enrolled in a course, leading to a degree, which is of not less than:

  • three consecutive weeks duration, for tuition fees paid for the 2011 and subsequent tax years; and
  • thirteen consecutive weeks duration, for tuition fees paid for the 2010 and earlier tax years.

d) a university, college or other educational institution in the United States providing courses at the post‑secondary school level if the student for whom the education tax credit is determined resides throughout the year in Canada near the border between Canada and the United States and commutes to that educational institution.

Institutions certified by the Minister of ESDC

1.10 If the designated educational institution is one that is certified by the Minister of ESDC as noted in ¶1.9(b), then the education tax credit is available only if the student has attained the age of 16 by the end of the year and is enrolled in the program to obtain skills for, or improve skills in, an occupation. The expression enrolled in the program to obtain skills for an occupation means that there must be sufficient skills to be acquired in the program to enable the student to work at an occupation. The expression enrolled in the program to improve skills in an occupation implies that the student already possesses sufficient skills to enable the student to work at an occupation and the program must be capable of improving those skills. An occupation, for this purpose, is considered to be employment as well as a profession, vocation, or trade. It is a question of fact whether a particular program is capable of improving a student’s occupational skills or is sufficient to furnish the student with enough skills to enable the student to work at an occupation. Second language training (in particular, French or English) may be viewed as providing a student with skills in an occupation as long as the course is undertaken for the purpose of gaining or improving language skills required for an occupation.

1.11 Where a course is taken at an ESDC-certified institution for personal or recreational purposes, no education tax credit is available. The fact that an educational institution is certified by the Minister of ESDC does not mean that the student is automatically eligible for the education tax credit. Such a determination depends on each individual’s particular situation.

Universities outside Canada

1.12 For purposes of ¶1.9(c), the degree sought must not be lower than the bachelor or equivalent level. For purposes of ¶1.9(d), the student must reside in Canada near the Canada-United States border throughout the year and commute to the educational institution in the United States. For further discussion, see Income Tax Folio S1-F2-C2 . Further information regarding educational institutions outside Canada can be found in Information Circular RC190 – Information for Educational Institutions Outside Canada and Information Circular RC192 – Information for Students – Educational Institutions Outside Canada.

List of designated educational institutions

1.13 A list of designated educational institutions is available by calling 1-800-959-8281. An educational institution that wishes to establish whether it qualifies as a designated educational institution within the meaning of subsection 118.6(1) may direct its enquiry as follows:

a) regarding ¶ 1.9(a) , to the provincial or territorial student financial aid authority (for contact information, see Provincial and Territorial Financial Assistance Offices).

b) regarding ¶ 1.9(b) , to:

Certification of Private Educational Institutions
Canada Student Loans Program – Learning Branch
Employment and Social Development Canada
200 Montcalm Street
P.O. Box 2090, Bag 50
Gatineau QC K1A 0J9

c) regarding ¶1.9(c) and 1.9(d) , to:

Assessment and Benefit Services Branch
Individual Returns Directorate
Canada Revenue Agency
5th Floor, Tower C
25 McArthur Avenue
Ottawa ON K1A 0L5
Canada

Qualifying educational program

1.14 A student is authorized to claim the full-time education tax credit for each month in the calendar year during which the student is enrolled on a full-time basis in a qualifying educational program at a designated educational institution, pursuant to subsection 118.6(2) (see formula in ¶ 1.4 ).

Definition of qualifying educational program

1.15 To be a qualifying educational program as defined in subsection 118.6(1), a program must run for at least three consecutive weeks and must require instruction or work in the program of at least ten hours a week throughout its duration and not simply for a minimum three-week period. Thus, a student taking several courses for three weeks out of an entire semester and meeting the ten hours per week requirement for those three weeks only, but not throughout the remainder of the semester, may qualify for the education tax credit for the months in which the qualifying three weeks occurred but would not qualify for the full-time education tax credit for the remainder of the semester. In such a case, the student would be considered to have followed two different programs during that semester, the program that qualified and the remainder that did not.

1.16 It is not necessary for the three consecutive weeks to be in the same calendar month. Periods where there are no classes, such as reading week may be included in the three week period as long as the hourly work requirement is met. A student may qualify for the part-time education tax credit for those months in which the student was enrolled at a designated educational institution but was not in a qualifying educational program (see the discussion of specified educational program and full-time or part-time student).

Program time that qualifies

1.17 The instruction or work referred to in ¶1.16 includes all forms of direct instruction, such as lectures, practical training, or laboratory work. Time spent by graduate students on research for the purpose of writing a thesis also qualifies. A student taking four full courses or more at an educational institution described in ¶ 1.9(a) will be accepted as being enrolled in a qualifying educational program. However, when a student is taking only three full courses, the educational institution must ensure that the work expectation of the program satisfies the 10 hours per week requirement. When the student’s program falls short of providing 10 hours weekly of lectures, practical training and/or laboratory work, that student’s time may be augmented by a reasonable estimate of time outside the classroom or laboratory, normally required and expected of a student during a particular program, for work assignments or other items listed below:

  • after enrolment, taking a test at the beginning of a program to establish the program level at which the student will participate;
  • taking an achievement test at the end of a program;
  • essays;
  • term papers;
  • other written work; and
  • oral presentations.

Post-secondary school level

1.18 In the case of a student enrolled at a designated educational institution referred to in ¶1.9(a), (c), and (d), the program of study must be at a post-secondary school level in order to qualify. Thus, in order to be considered a qualifying educational program, a program must be at a post‑secondary school level, except in the case of courses (other than courses designed for university credit) provided by educational institutions certified by the Minister of ESDC referred to in ¶1.9(b). Generally, in Canada, to be considered at the post‑secondary school level, a course should provide credit towards a degree, diploma or certificate and would normally require the completion of secondary school as a prerequisite for taking the course. It is generally assumed that a course is at the post‑secondary school level if the education ministry for the province in which the course is given considers it to be at that level. Courses taken for purposes of educational upgrading to allow entry into a university or college program would not normally qualify for the education tax credit because these courses are not considered to be at a post-secondary school level.

Post-doctoral fellowship

1.19 An individual undertaking a post-doctoral fellowship is not considered to be enrolled in a qualifying educational program for purposes of subsection 118.6(1). For 2010 and subsequent tax years, the definition of qualifying educational program was amended to clarify that a program of study at a post-secondary school level consisting primarily of research, will not be a qualifying educational program unless it leads to a diploma from a college or a Collège d’enseignement général et professionnel, or a bachelor, masters, doctoral or equivalent degree. The amendment to restrict the education tax credit to programs that lead to a degree clarified the intent of the legislation and confirmed the CRA's existing position. Post-doctoral fellowships have consistently been viewed and treated by the CRA in the same manner as other programs that require individuals to undertake a period of paid training after the completion of an individual’s studies and prior to pursuing an independent professional career (for example, apprentices, articling students for accounting and law, and medical residents). As with the compensation received by these other professionals, the compensation received by post-doctoral fellows is generally taxable. Post-doctoral fellows were generally precluded from claiming the education tax credit even before the 2010 amendment to the definition of qualifying educational program in subsection 118.6(1).

Allowance, benefit, grant, or reimbursement

1.20 If a student receives an allowance, benefit, grant, or reimbursement of expenses in respect of a program from a person with whom the student is dealing at arm’s length, that program is excluded from the definition of qualifying educational program, unless the amount or benefit received by the student is:

a) an award, such as a scholarship, fellowship or bursary, or a prize for achievement in the student’s ordinary field of endeavour;

b) any benefit received because of a loan made to the student under the Canada Student Loans Act or An Act respecting financial assistance for education expenses of the Province of Quebec, or by reason of financial assistance given to the student in accordance with the requirements of the Canada Student Financial Assistance Act; or

c) financial assistance received under Part II of the Employment Insurance Act (or under a program similar to one established thereunder), from a government or government agency in Canada or other organization under the terms of an agreement with the Canada Employment Insurance Commission, or under a program established under the authority of ESDC.

1.21 An individual in receipt of an allowance, benefit, grant, or reimbursement of expenses from an arm’s-length person, in respect of a program, other than amounts or benefits described in ¶1.20 is generally disqualified from claiming the education tax credit. An occupational training allowance similar to that in ¶1.20(c) but given by any other granting authority must be examined to determine if it is included in income under a separate provision of the Act. If it is, the student is disqualified from claiming the education tax credit unless the amount is an award or prize described in ¶1.20(a). A non‑repayable portion of a student loan is not considered to be a grant and does not disqualify a student from claiming the education tax credit (see ¶1.20(b)).

No tuition fees

1.22 Some post-secondary school level programs are available without payment of any tuition fees. As described in ¶1.20, receipt of a benefit frequently disqualifies a student from being entitled to an education tax credit in connection with a program. The CRA generally considers free tuition to be a benefit unless a program is available to the public at large at no cost. For example, if an educational institution were to offer free tuition only to persons age 65 or older, these individuals would have received a benefit such that they would not be entitled to the education tax credit. Where free or reduced tuition is determined to be a scholarship or bursary pursuant to paragraph 56(1)(n), the student’s ability to claim the education tax credit is not affected by the benefit.

1.23 As discussed in ¶1.20, a student’s right to the education tax credit may depend on whether an amount received from an arm’s-length person in respect of a program is a grant, scholarship, fellowship, or bursary. The payer’s designation of an amount as a grant, scholarship, fellowship, or bursary does not necessarily indicate the real nature of a payment; in some cases the contractual arrangements under which a payment was made must be examined. For further discussion, see Income Tax Folio S1-F2-C3, Scholarships, Research Grants and other Education Assistance.

Specified educational program

1.24 For purposes of the part-time education tax credit, students are required to spend not less than 12 hours per month on courses in a specified educational program. A specified educational program is a program that would be a qualifying educational program but for the requirement for a student enrolled in the program to spend not less than 10 hours per week on courses or work in the program. The 12 hours per month refers to a calendar month and includes lecture time and additional time spent on practical training and laboratory work. When a program falls short of providing the student with 12 hours per month of direct course instruction, a reasonable estimate of time outside the classroom or laboratory for work assignments or other items as provided in ¶1.17 may be included for this purpose.

Enrolled as a full-time or part-time student

1.25 The requirement in subsection 118.6(2) for enrolment as a full-time student at a designated educational institution must be met on the basis of the facts in each case. This requirement can be met by a student taking courses by correspondence or by a person enrolled in a distance education program. The requirement for enrolment as a full‑time student at a designated educational institution is a separate test over and above the requirement respecting a qualifying educational program. Where a student is not considered to be enrolled as a full-time student, the student may be eligible for the part-time education tax credit if the program in which the student is enrolled meets the requirements of a specified educational program and the student spends not less than 12 hours per month on courses in the program. Generally, an educational institution’s classification of a student as full-time or part-time will be accepted if the method of classification is reasonable and consistent.

1.26 A student who is in regular attendance in a qualifying educational program is considered to be enrolled as a full‑time student. Similarly, a student who is participating in graduate studies on a regular basis in a particular month is ordinarily considered to be enrolled as a full-time student if the student is registered for the regular academic year even though the requirements for attendance in class for such studies are minimal. Therefore, such a student who spends much of the time in a laboratory or library engaged in research or writing a thesis or who spends part of the academic year engaged in research elsewhere than at the university would normally be regarded as being a full-time student at the institution where the student is so registered.

Co-operative courses

1.27 Some designated educational institutions provide co-operative courses in which the student attends for an academic period and then works for one or more co-op terms in a business or industry relating to the student’s academic studies. The student is regarded as being enrolled as a full-time student only during those months in which the designated educational institution is attended.

Two or more part-time enrollments

1.28 An individual will be considered to be enrolled as a full-time student for purposes of the education tax credit when that individual is enrolled part-time at two or more designated educational institutions for the same period of time if the courses undertaken by the student represent a single program of study that would otherwise qualify as a qualifying educational program and the combined hours spent on the courses or work in the program equal at least ten hours per week.

Income from employment

1.29 For tax years prior to 2004, a program was excluded from the definition of a qualifying educational program if the program was taken by a student during a period in which the student received income from an office or employment, and the program was in connection with, or as part of the duties of that office or employment. However, for 2004 and subsequent years, a qualifying educational program no longer excludes such programs provided that the costs of the program are not reimbursed by the employer. For information concerning the treatment of employer-paid educational costs, see Guide T4130, Employer’s Guide - Taxable Benefits and Allowances.

1.30 Subject to the rules applicable to employer-paid educational costs, when a student who is or was employed receives a scholarship or bursary from the student’s employer on condition that the student return to that employment, the amount is considered to be income of the student under section 6, and not scholarship income within the meaning of paragraph 56(1)(n).

1.31 When an employer-employee relationship has not yet been established and a student receives a scholarship or bursary in return for undertaking to commence employment with the person granting the award after completion of the studies or course of training, the payment received would normally be considered to be scholarship income under paragraph 56(1)(n) and it would not disqualify the student‑recipient from claiming the education tax credit. However, any such payments arising, or received, after the student becomes a full-time employee must be treated in accordance with the comments in ¶1.30. For further discussion, see Income Tax Folio S1-F2-C3 .

Authorized certificate

1.32 In all cases where an education and textbook tax credit or a transfer of the education and textbook tax credits is claimed (see ¶ 1.2 ), the student must obtain a certificate authorized by the Minister of National Revenue containing prescribed information from the designated educational institution as proof of enrolment. The authorized certificates are:

For institutions in Canada:

Form T2202A, Tuition, Education, and Textbook Amounts Certificate; or

Form TL11B, Tuition, Education, and Textbook Amounts Certificate – Flying School or Club.

For institutions outside Canada:

Form TL11A, Tuition, Education, and Textbook Amounts Certificate – University Outside Canada; or

Form TL11C, Tuition, Education, and Textbook Amounts Certificate – Commuter to the United States.

1.33 It is no longer necessary to file the certificate with the T1 income tax return, but taxpayers who claim all or a portion of the available education and textbook tax credits should retain a copy of the certificate for their records as they must be able to provide the document at the request of the Minister, pursuant to subsection 220(2.1).

1.34 Although a student cannot claim the education or textbook tax credits without an authorized certificate, obtaining such a certificate does not ensure the student’s eligibility for the credits. There may be circumstances where the institution issuing the certificate is not aware that a program does not meet the criteria of a qualifying or specified educational program for a particular student, such as where a student is in receipt of certain benefits (see ¶ 1.20 - 1.23 and 1.29). Each student’s eligibility for the education and textbook tax credits is determined based on all of the criteria in section 118.6 and the facts of the student’s particular situation.

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