Finance your return to school tax-efficiently

Why read this?

You are:

• getting a post-graduate degree;
• going back to school as an adult; or
• learning a trade.

1. Report Lifelong Learning Plan use

If you return to school, you can withdraw up to $10,000 a year, to a maximum $20,000 over four years, from your RRSP to pay your tuition. To be eligible, you must be enrolled full-time at a qualified educational institution.

When enrolling or attending school

• To withdraw funds, use form RC96: Lifelong Learning Plan Request to Withdraw Funds from an RRSP.
• Have the RRSP issuer complete Part 2 of the form, and keep it for your records.

At tax time

a) Report LLP withdrawals by listing the total from Box 25 of your T4RSP: Statement of RRSP Income on Line 20 of Schedule 7: RRSP and PRPP Unused Contributions, Transfers and HBP or LLP Activities.

(Check the box on Line 21 if you withdrew the funds for your spouse or common-law partner.)

b) Designate RRSP contributions as LLP repayments on Line 7 of Schedule 7. If you repay less than the minimum, report the difference on Line 129 of the return.

TIP: Your minimum repayment is listed on her Notice of Assessment or Reassessment, Form T1028: Your RRSP information, or in My Account.

WARNING: Don’t include RRSP repayments in your total RRSP contributions.

2. Report RESP withdrawals

Since RESPs can stay open for 35 years, you could use RESP money to fund your education, even if you’re an older student, says Adam Morke, tax specialist at Stern Cohen Accountants in Toronto.

• Report withdrawals, listed in Box 42 of your T4A: Statement of Pension, Retirement, Annuity and Other Income, on Line 130 of the return.

3. Report apprenticeship incentive or completion grants

You may be eligible for up to $4,000 in grants to cover tuition and other expenses for your education in a Red Seal trade, such as baking or bricklaying, which is regulated by the provinces.

• Report grant amounts from Box 130 of your T4A: Statement of Pension, Retirement, Annuity and Other Income on Line 130 of the return.

4. Claim interest paid on student loans

If you have a loan under the Canada Student Loans Act, the Canada Student Financial Assistance Act, or a similar provincial program, you can claim the interest paid on your loan in the last five years.

• Enter interest paid on Line 319 of Schedule 1: Federal Tax

Sources: Adam Morke, CPA, CA, manager and tax specialist, Stern Cohen Accountants, Toronto, Ont.; CRA; KPMG’s Tax Planning for You and Your Family 2015.