In these uncertain times, many people are taking up a new class, or a new training program to pick up new skills and upgrade their careers and increase their working income.
The federal government has brought the Canada training credit (CTC)to help out in the process. It is now among the various tax credits available and eases the financial burdens on tuition and other fees for many Canadians.
So without further ado, let’s dive in.
1. What is the Canada training credit?
The Canada training credit is a new refundable tax credit provided by Canada Revenue Agency and is available for eligible tuition and other fees paid for courses taken in 2020 and subsequent taxation years. It is different from the existing tuition tax credit.
About the Canada Training credit limit, starting from 2019, you can accumulate $250 each year, up to a maximum of $5,000 in your lifetime, which will store in your account until you choose to use it.
What is a tax credit?
The tax credit is an amount of money that you can subtract directly from the taxes you owe. It reduces the actual amount of tax owed. You receive a credit when you pay for your education, and that credit lowers the amount when you file your tax return.
Canada training credit is the new refundable credit for the same purpose.
2. How does Canada training credit help?
In the post-pandemic world, the private sector and the labor market are going through a shift. Canada’s labor market is transforming.
Several factors are contributing to this change:
- Automation creates less but high demand and specialist jobs
- Remote work expanding the pool of recruits
- Hybrid (offline/online) environment adaptability issues for employees
- Financial pressures of the pandemic
The Canada training credit will help decrease the post-secondary education costs and tuition amount required to equip people looking for jobs to seek skills, training, professional advice, and guidance. This will help them prepare better for job uncertainty.
3. How will I receive my refundable Canada training credit?
Unlike some other credits, the Canada training credit is a refundable tax credit. The Canada training credit claimed on your income tax and benefit return will reduce your tax owing. If the credit is more than your tax owing, you will get a refund for the difference.
4. How is the Canada training limit calculated?
When claiming the CTC, your amount is the lesser of:
- half of the eligible training fees and tuition amount you paid for the year
- your CTC limit for the tax year
The CTC is calculated with the following formula:
[CTC limit from the previous tax year] + [annual accumulation of $250 (if eligible)] – [CTC claimed in the last year]
Example: Let’s say it’s 2023 and Harry has taken a course to upgrade his skills. He pays $4,000 for tuition to an eligible Canadian college. He was eligible to accumulate $250 every year from 2019 to 2022 and is yet to claim the CTC.
Formula: $750 + $250 – $0 = $1,000
Then Harry could claim $1,000 as it’s the lesser amount between his CTC limit ($1,000) and half of his eligible tuition fees incurred ($2,000).
He can accumulate another $250 for 2024, 2025, and so on, as long as he continues to meet all CTC requirements every subsequent tax year and hasn’t hit the lifetime maximum or reached the age of 65.
5. Who is eligible for the annual accumulation of $250?
Any Canadian who is a working individual between the age of 25 and 64 at the end of the year can accumulate $250 towards his or her Canada training credit limit, provided they satisfy all of the following conditions for the year:
- file a tax return for the year
- have been a Canadian resident throughout the year
- have a total of $10,000 or more of individual net income from:
- maternity and parental benefits, and
- working income (income from an office or employment, business income, the taxable part of scholarship income and research grants, the tax-exempt part of earnings of status Indians and emergency service volunteers, and income under the Wage Earner Protection Program Act).
- have individual net income for the year that does not exceed the top of the third tax bracket in that year ($155,625 in 2022)
- The tuition fee is paid to an eligible educational institution.
6. What is an eligible educational institution?
There are some eligibility requirements that an educational institution is subject to. These are:
- It should be a university, college, or other educational institution in Canada providing courses at a post-secondary level; or
- an institution in Canada providing occupational-skills courses that are certified by the Minister of Employment and Social Development.
Note: Online courses from eligible educational institutions are also valid for the Canada training credit.
7. What tuition and fees are eligible for the Canada training credit?
The eligible tuition and fees for the Canada training credit include:
- tuition fees
- ancillary fees (e.g., admission fees, exemption fees, and charges for a certificate, diploma, or degree); and
- examination fees
8. When can I start claiming the Canada training credit?
Provided you satisfy all the conditions, you can claim the Canada training credit starting with your 2020 income tax and benefit return, for eligible tuition and fees paid for courses taken in 2020.
Can I claim both the Canada training credit and the existing tuition tax credit in the same year?
Yes, you can claim the Canada training credit as well as the tuition tax credit in the same year. However, in calculating your tuition tax credit, your eligible tuition and fees paid for the year will be reduced by the Canada training credit you claim in that year.
Example: In 2023, Jenny takes a course and pays $1,200 in eligible tuition fees. Just like Harry, she has also not claimed any Canada training credit in previous years. Assuming she satisfies all the conditions to be eligible for the annual $250 accumulation in each of the years from 2019 to 2022, her accumulated training credit limit for 2023 will be $1,000.
Jenny can now claim a Canada training credit of $600 (being the lesser of 50% of eligible tuition fees paid and her 2023 Canada training credit limit) for the 2023 taxation year.
In calculating Jenny’s tuition fees eligible for the tuition tax credit for the 2023 taxation year, she will have to subtract her claim for the Canada training credit of $600 from her total eligible tuition fees of $1,200.
Thus, the final amount to which the credit will be applied will be $1,200 – $600, which is $600.
9. Is there any limit to how much I can accumulate towards my Canada training credit limit?
Beginning in 2019, you may be able to accumulate $250 in each year that you are eligible, for use in calculating your Canada training credit for a future year, up to a maximum of $5,000. Once the total of the annual accumulations has reached $5,000, or you have reached the age of 65 years or die by the end of a year, whichever happens, earlier, no further amount will be accumulated, even if you have used some or all your Canada training credit limit to claim the Canada training credit.
Example: For Jenny, her unused balance for 2023 is $400 ($1,000 – $600). If she satisfies all the conditions in 2023, she will accumulate an additional $250 for 2024. Her Canada training credit limit for 2024 will be $650 ($1,000 + 400 – $750). This amount will be indicated on Jenny’s 2023 Notice of Assessment (NOA), as her Canada training credit limit for 2024 that she could use in 2024 or later years.
At the end of the year that you turn 65, your unused Canada training credit limit will expire, and no additional amounts will accumulate for use in subsequent years.
10. How will I know my Canada training credit limit for any taxation year?
Your Canada training credit limit will be communicated to you each year on your Notice of Assessment (NOA) and will be available through the CRA’s My Account portal.
11. Can I transfer my unused Canada training credit limit to another person?
No, unlike other tuition credits, you cannot transfer any unused Canada training credit limit to another person. Any balance remaining by the time you turn 65 will expire. Therefore, no determination of your Canada training credit limit will be made for any year following the year you turn 65.
You can, however, where applicable, carry forward unused eligible tuition fees and expenses paid in respect of the year, or transfer them to your spouse or common-law partner, parent, or grandparent, for the Tuition Tax Credit.
In the tough times, we live in, finances have taken a hit. But, there are several such credits available to help you alleviate the monetary pain that occurs when you have to pay tuition or file for taxes.
We hope that we have provided you with the relevant knowledge for the Canada training credit and now you’ll be able to use the credits smartly to save on your yearly tax return!
For more information
The CRA provides the latest information on Canada.ca. You should check online regularly for updated forms, policies, guidelines, questions and answers, and guidance.
You can also consult the Department of Finance Canada’s Budget 2019 documents for more details.As an Amazon Associate, Icy Canada earns from qualifying purchases.