The Canada Revenue Agency recognizes that repaying student loans can be financially difficult in some cases. To help offset some of that burden, the CRA offers a deduction for qualifying student loan interest payments.
The CRA allows you to claim the interest you have paid on many of your post-secondary student loans on your tax returns. However, there are restrictions on the types of loans that qualify.
You cannot claim interest from personal loans or lines of credit even if you used those monies to pay for post-secondary education. Additionally, you may not claim interest on student loans received from foreign banks.
You may only claim interest payments on loans received under the Canada Student Loans Act, the Canada Student Financial Assistance Act, or similar provincial or territorial programs.
If you combined any qualifying loans with non-qualifying loans, you cannot claim the interest paid as student loan interest. For example, if you took out a home equity line of credit to pay for university, that doesn't count as a qualifying loan, and you cannot claim the interest as student loan interest on your tax return.
Understanding Non-Refundable Tax Credits
Your student loan interest, with the rest of the information you report on lines 300 to 395 of your income tax return, earns you a non-refundable tax credit.
If you owe taxes, this amount is subtracted from your taxes owed; as a result, you have a lower tax bill. However, if you do not owe any taxes or if you have covered your taxes due with other credits, you cannot get a refund based on your student loan interest. The interest earns you a tax credit that is non-refundable, so you cannot convert it into a tax refund.
Maximizing Your Student Loan Interest Claim
Because you cannot claim a refund for your student loan interest alone, you should not claim your student loan interest during a year when you don't owe a lot of taxes. Instead, save the claim and carry it forward to a future year. As of 2015, the CRA allows you to carry forward student loan interest for five years.
For example, if the interest you paid on your student loans for the last tax year equals $500, but you owe nothing in taxes, don't waste the claim. Instead, save it for next year or the following year, and use it to offset your taxes owed for those possibly higher earning years.
Filing Your Taxes
If you want to claim the non-refundable tax credit for student loan interest, enter the amount of eligible interest you paid on line 319 of your income tax return.
Claim any corresponding provincial or territorial credits. You may claim those credits by entering the amount of your student loan interest on line 5852 of your provincial income tax return.
If you file electronically, keep all of your receipts for payments made and interest paid on file. If you file a paper return, attach the corresponding information to your return.