By Sheryl Smolkin
Read this article and comments at Moneyville.ca
We traditionally think of fall as the time when the kids go back to school, but some lucky adults are embarking on university, college or other training programs with both the blessing and the financial support of their employers. And the tax treatment of this employee benefit gives them an even bigger break.
Companies frequently cover tuition costs upon successful course completion for both business-related and other programs.According to the 2010 Towers Watson Benefits Database, 68 per cent of participating companies provided some level of tuition reimbursement.
For example, the Bank of Canada gives full tuition subsidies up to $7,000 to each employee for courses related to their position and reimburses 75 per cent of tuition for unrelated courses up to the same amount. In contrast, Bayer Inc. pays a total maximum of $7,000 in tuition subsidies for any courses completed by individual staff members.
If your company gives you a scholarship, a bursary or reimburses tuition, at tax time you will receive a T4 slip reporting the amount received as employment income. However, the total amount generally qualifies for the scholarship exemption (line 130 of your tax return) and will be subtracted from your taxable income.
In cases where your employer pays directly for tuition or training costs, if the course is mainly for the benefit of the company these payments are not treated as taxable income. Therefore, the amounts will not appear on your T4 slip, even if the training leads to a degree, diploma or certificate.
Canada Revenue Agency has established the following broad guidelines as to what constitutes work-related training or education:
Specific employment-related training: Courses taken to maintain or upgrade work-related skills are considered as mainly for your employer’s benefit when it is logical to assume that if you have taken a leave you will resume your employment for a reasonable period of time after you complete the course.
For example, tuition fees and other associated costs such as books, meals, travel, and accommodation that companies pay for employee courses leading to a degree, diploma, or certificate in a field related to your current or future responsibilities in the company’s business are not a taxable benefit.
General employment-related training: CRA generally considers that other business-related courses although not directly-related to a company’s own business, are taken mainly for the company’s benefit. For example, fees paid for stress management, employment equity, first aid, and language courses are not a taxable benefit.
Personal interest training: Courses taken for personal interest (i.e. art appreciation) or technical skills not related to your employer’s business are taken mainly for your own benefit and, therefore company-paid tuition is a taxable benefit.
Full-time students or part-time disabled students can also deduct $400 for each month enrolled plus $65/month for text books. If you are enrolled part-time and do not have a mental or physical disability, you can deduct your tuition and $120 for each month of part time enrolment, plus $20 per month for textbooks.
In addition, some companies offer scholarships or bursaries to children of employees or other family members. If your child gets a company scholarship, he will have to report the amount on his tax return, subject to the scholarship exemption and other deductions described above. You do not have to report these amounts as taxable benefits.