What is Canada's Training Limit?
When you pay tuition, you’re not just getting an education. You’re also getting a tax credit which can help to lower your tax bill when you file your return. If you’re fortunate enough to be a student not owing any tax at all, you can still benefit from some of the tax credits available, including the Canada training credit (CTC).
Recognizing the financial burden many people and their families face from post-secondary education costs, the Canadian government introduced a new credit to help support upskilling and lifelong learning. The Canada training credit may help optimize your refund or offset some tuition fees. In this article, we’ll tell you all you need to know about the Canada training credit, who is eligible, and how to claim it.
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What is Canada's Training Credit?
The Canada training credit is a new refundable tax credit for eligible tuition and other fees paid for in 2020 and subsequent tax years. This credit is one of several refundable tax credits the Canadian government put in place to help alleviate the cost of training fees. Think of the tax credit like a coupon you can apply to your next tax bill. Some of the eligible fees include:
- Tuition fees
- Examination fees
- Ancillary fees and charges (admission fees, exemption fees and charges for a certificate, diploma, or degree)
After you meet all the eligibility requirements, you will be able to claim the Canada training credit. Claiming the credit on your income tax will help reduce the taxes you owe. If the credit you claim is more than what you owe, the Canada Revenue Agency (CRA) will send a refund for the difference.
What is Canada's Training Limit?
Starting in 2019, if you meet the required criteria, you can accumulate $250 per year (up to a lifetime training amount of $5000) that will sit in an account until it can be used. You’ll be able to access these funds when you have any eligible tuition fees.
The credit limit is calculated based on your training credit limit for the tax year and half of the eligible tuition and fees you paid that year. You can only claim the lesser amount between your credit limit and 50% of your eligible tuition. The CRA will include your accumulated Canada training limit in your Notice of Assessment.
Who is eligible for Canada Training Credit?
To qualify for this new credit, you must meet all of the following criteria:
- You are between the age of 25 and 64
- You have earned an income of at least $10,000 and up to $150,000 (this can include maternity and parental leave benefits)
- You have filed an income tax and benefit return for the year
- Your Canada training credit limit for the year is greater than zero
- Tuitions and/or fees are paid to an eligible educational institution for the applicable year
- Tuition and/or fees are eligible for the existing tuition tax credit
- You are a Canadian resident
If you fall outside the designated age bracket, your credit limit is automatically zero. Any unused Canada training credits you have will expire and cannot accumulate for use at the end of the year you turn 65. Unlike tuition credits, any unused training credit limits cannot be transferred to a beneficiary. However, you can carry forward or transfer unused eligible tuition fees and expenses to a spouse, common-law partner, or dependant, for a tuition tax credit.
How to claim Canada Training Credit
For any given year, you will be able to claim either 50% of your eligible tuition for that year or your credit limit under the Canada training credit. In other words, if you have accumulated $250 in Canada training credits and paid $6000 in tuition fees for the year you’re filing, you can claim $250 since it’s the lesser amount between $250 (your accumulated credit limit) and $3000 (50% of your tuition fees). The educational institution you attended in the year you claim your CTC will send you a T2202 slip, which completes Schedule 11 in your tax return. You’ll then transfer that amount to line 45350 of your T1.
Canada Training Credit vs. Tuition Tax Credit
Where the CTC is a refundable amount, the Tuition Tax Credit is a non-refundable credit. This means if the tuition amount is greater than the tax amount owed, you won’t get a refund from the claimed amount. As a student, you may have leftover tuition expenses after you bring your taxes owed to zero. You have the option to transfer unused tuition amounts to the next year or to a spouse, common-law partner, parent, or grandparent.
Your post-secondary institution will issue form T2202A (Tuition and Enrolment Certificate) to claim the tax tuition credit. The form indicates Box A the total eligible tuitions fees paid and months you were enrolled in school, either part-time or full-time. You can’t choose how much tuition to claim or how much to carry forward. This is automatically determined based on the rules in the Income Tax Act. You can check your CRA My Account to see if you have any unused tuition credits from previous years.
Tax Filing Software
For most people, tax season is an unwelcomed part of performing our civic duty. Overwhelming is an understatement with all the forms, newly available credits to claim, and receipts to keep track of. Looking for a more straightforward solution that can save you time and money? New and improved tax software takes the guesswork out of filing and helps maximize your return.
Wealthsimple makes your maximum refund a sure thing. Their smart tools will find every deduction available to you and optimize your return. They even offer up to $50 if you can find a better refund elsewhere. The auto-fill option allows you to import your tax slips for a quick return. Investing in crypto and not sure how to reflect this when you file? With Wealthsimple, you can link your crypto wallets from multiple exchanges and have capital gains or losses on your transactions calculated automatically.
Credit Karma Tax
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H&R Block lets you file your taxes with confidence and accuracy. They offer three different packages to give you the assistance you require, one of them being a free option. Each package automatically includes return optimization, access to an online help center, auto-fill return options, and a convenient SmartSearch tab to simplify inputting your forms. If you’re looking for some more professional advice, you can choose one of their higher tiers for complete peace of mind.
The Bottom Line
With inflation rates outpacing the average household income, it may feel like your wallet keeps shrinking. The good news is, there are plenty of tax credits available, you just need to know where to look. Whether you’re filing your own taxes, using software, or paying someone, knowing what credits and deductions are available will help lower your taxable income and improve your chances of getting a refund.
Frequently Asked Questions
To claim an online course under the Canada training credit, it must be from an eligible education institution. For the purpose of calculating the Canada training credit, an eligible education institution includes:
- Post-secondary level university, college, or other educational institution
- A certified institution in Canada by the Ministry of Employment and Social Development providing occupational skills
So long as your online courses fall under one of these categories, you will be able to claim the Canada training credit.
No, but you do have the option to claim both. Eligible tuition fees for the Tuition Tax Credit will be reduced by the amount of the training tax credit deducted. For example, if your tuition amount is $5,000 and you claim $250 for the Canada training credit, the amount of tuition used in calculating your tuition tax credit will be $4,750 (plus any unused tuition credits, if applicable). The first taxation year in which a Canada training credit can be claimed was 2020, based on tuition fees incurred in 2020 and the accumulated training credit for 2019 ($250).
You can find your Canada training credit limit on your previous year’s Notice of Assessment or through the CRA My Account portal. Your 2019 Notice of Assessment will show the Canada training limit for 2020 that can be used for eligible tuition fees and courses taken in 2020.
Additional information on available credits and proposed changes is available on Canada.ca. Taxpayers can access updated forms, policies, guidelines, questions and answers, and guidance.