Want to expand your education but aren’t sure if you can afford it? You might be eligible for a refundable tax credit for taking a course.
The Canada Training Credit (CTC) was introduced in 2019 to encourage Canadians to pursue further education and work-related training in their adult lives.
The lifetime Canada Training Credit limit is $5,000, and eligible taxpayers can accumulate $250 per year toward the training tax credit, which can be used to reduce the overall cost of education.
Below, I’ll outline how this tax credit works, who’s eligible for it, and how it works with other credits, such as the existing tuition tax credit.
Who Is Eligible For The Canada Training Credit?
The tax credit is designed to reduce the financial burden of furthering education for adult Canadians between the ages of 25 and 65. If you’re not yet 25, then you’re better off pursuing traditional student loans.
The requirements to claim the Canada Training Credit are as follows:
- The individual must be a full-time resident of Canada for the tax year
- The individual must be between 25 and 65 by the end of the year
- Their individual net income must be below the maximum of the third tax bracket (below $165,430 in 2023, but this changes annually)
- The individual must have at least $10,000 of income from working income or maternity and parental benefits
Now, if you happen to turn 65 before you’ve accumulated the maximum training credit of $5,000, you won’t be able to accumulate more.
For example, suppose you accumulate $3,500 towards your accumulated CTC limit and turn 65 that year. In that case, that is the most you will ever be eligible for, as you won’t be able to collect an additional $250 per year after age 65.
How Does The Canada Training Credit Work?
Now that you know a bit more about the eligibility requirements for this new refundable tax credit, let me take a minute to explain how it works.
For every year that a taxpayer is eligible for this tax credit, their Canada Training Credit limit increases by $250, with a maximum credit limit of $5,000.
In other words, if you meet the eligibility requirements and were at least 25 in 2019 and remain eligible in 2023, then you should have accumulated $1,000. This can be applied as a refundable tax credit towards eligible tuition fees and training courses.
Example Of How The CTC Limit Works
Still struggling to understand how the Canada Training Credit works?
Here’s a real-life example of how the training credit works and how the limit changes as it’s used to help pay for training through an eligible educational institution:
In 2023, Samantha enrolled in a training program and pays $2,500 in eligible tuition fees to a qualified educational institution in Canada.
Assuming Samantha is eligible to accumulate $250 per year between 2019 and 2022 (four years), her Canada Training Credit limit for 2023 is $1,000 ($250 x 4 years).
Suppose Samantha meets all the requirements to claim the Canada Training Credit in 2023. In that case, she can claim an amount of $1,000 as a Canada Training Credit for the 2023 taxation year.
The claimed Canada Training Credit must be the lesser of:
- Your total Canada Training Credit limit
- 50% of eligible tuition fees paid
In this case, Samantha’s $1,000 Canada Training Credit limit is less than 50% of her $2,500 tuition ($1,250), so she would claim the full value ($1,000 accumulated over four years) of her Canada Training Credit on her 2023 tax return.
Her unused balance for 2023 is $0 ($1,000 – $1,000) since she maxed out her credit for 2023.
That being said, if Samantha continues to meet all of the eligibility requirements in 2023, she will accumulate an additional $250 for 2024 and subsequent tax years (up to a lifetime maximum of $5,000).
Over her lifetime, until the end of the year that she turns 64 (when eligibility ends), Samantha will be able to accumulate up to an additional $4,000 ($5,000 max – $1,000 used in 2023) for use in future training programs.
How Can I See My Canada Training Credit Limit For The Tax Year?
Every year, the Canada Revenue Agency sends out a Notice of Assessment (NOA), which estimates the tax credits and benefits that you’re eligible for. To see your Canada Training Credit limit, simply look at the previous year’s notice.
What Courses Are Eligible For The Canada Training Credit?
The Canada Training Credit can only be used towards an eligible educational institution or occupational skills courses. These must be one of the following:
- A Canadian institution certified by the Minister of Employment and Social Development offering occupational skills courses
- A Canadian university, college, or other post-secondary level institutions
A good example of occupational skills courses are financial designation courses offered by institutions such as the Institute for Advanced Financial Education, which offers CPA and CFA certification courses.
FAQs About The Canada Training Credit Limit
To wrap things up, here are a few quick answers to some of the most commonly asked questions and concerns regarding the Canada Training Credit.
What Is The Lifetime Maximum For The Canada Training Credit?
The lifetime maximum for the Canada Training Credit is $5,000. For example, if you use $1,500 one year, then you’ll have a lifetime training amount limit of $3,500 remaining.
How Is The Canada Training Credit Limit Calculated?
The Canada Training Credit limit is calculated based on eligibility factors, including age, earnings claimed on income tax returns and Canadian residency status.
If you remain eligible for consecutive years, you’ll accrue $250 each year that you’re eligible for the credit. If, for some reason, you’re ineligible for the tax credit for one year, then you won’t collect $250 for that year.
For example, over a four-year period, if you remained eligible for three years and then lived abroad the fourth year (weren’t a resident of Canada), then your calculated credit limit would be $750 ($250 x 3 years) instead of $1,000.
How Does The Canada Training Credit Affect The Tuition Tax Credit?
You can claim both tax credits on the same return. However, you cannot claim the same amount for both tax credits. For example, if your total tuition was $5,000 and you claimed $1,000 for the Canada Training Credit, then you could only claim $4,000 (the remainder) for your tuition tax credit.
What Happens To Unused Canada Training Credit?
It remains in a notional account managed by the CRA. Here, it will continue to increase by $250 every year that you’re eligible for the Canada Training Credit (up to a maximum of $5,000).
Conclusion – Take Advantage And Reduce Your Education Costs
One of the best ways to increase your income and improve your financial situation is to invest in furthering education courses during your professional career and adult life.
The Canada Training Credit allows eligible taxpayers and Canadian residents to claim a refundable tax credit that can make adult education more affordable.
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