Principal Issues: Is the education tax credit available when student has received reimbursement for the course/program and has been T4'd for the reimbursement?
Position: No.
Reasons: 118.6(1) definition of a qualifying program specifically excludes programs for which any sort of allowance, benefit, grant or reimbursement is provided by an arm's length person.
2008-029042 XXXXXXXXXX Pamela Burnley (613) 957-3498 October 6, 2008
Dear XXXXXXXXXX :
Re: Education Tax Credit
This is in response to your letter of August 14, 2008 inquiring about the education tax credit.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings". This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views.
Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.
You have asked if a student can claim the education tax credit if they have received salary or wages from a job that is related to the program of study and the tuition is reimbursed by their employer and included on their T4 slip as a taxable benefit.
For years prior to 2004, the former definition of "qualifying educational program" in the Income Tax Act (the "Act") excluded any program taken by a student:
(i) during a period in respect of which the student receives income from an office or employment, and
(ii) in connection with, or as part of the duties of, that office or employment.
The federal budget of March 2004 removed this exclusion and the change was applicable to the 2004 and subsequent tax years. This means that provided all other requirements are met, a course or program taken by an individual in connection with his or her employment and during which time the individual received income from that employment is a "qualifying educational program" eligible for the education tax credit.
Subparagraph 118.5(1)(a)(iii) of the Act provides that a tuition tax credit may be deducted from tax except to the extent that the tuition is paid on the individual's behalf by the individual's employer and is not included in computing the individual's income. This provision specifically contemplates that the tuition tax credit is available where the fees have been included in the taxpayer's income.
However, subsection 118.6(1) of the Act specifies that a "qualifying educational program" for the purposes of the education tax credit does not include a program if the student receives, from a person with whom the student is dealing at arm's length, any allowance, benefit, grant or reimbursement for expenses in respect of the program other than such things as a scholarship or bursary, a Canada student loan or certain government financial assistance paid pursuant to an agreement with Human Resources and Skills Development Canada. An individual is not entitled to claim the education tax credit where there has been any amount of reimbursement, allowance or benefit from an arm's length person (including an employer with which the student deals at arm's length).
There is no provision in the Act such as there is for the tuition tax credit, which allows the education tax credit to be claimed on the basis that the tuition fees are included as a taxable benefit to the taxpayer.
The CRA's general, current views regarding this subject are contained on the CRA website and in pamphlet P105, "Students and Income Tax".
We trust that these comments will be of assistance.
Yours truly,
Eliza Erskine
A/Manager
Non-Profit Organizations and Aboriginal Issues Section
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch