What’s Your Tax Issue? Exam Fees

The Tax Issue

I am a physician doing my residency at McGill Unversity. Last year, I paid $3725.00 to the Royal College of Physicians and Surgeons in respect of exam fees required for my professional designation. I have a very official looking receipt but I’m being told that these fees may not be deductible. I’m getting different opinions everywhere. Do these fees qualify as tuition for tax purposes?

The Answer

Prior to 2011, the short answer was no. Only exam fees paid to a an educational institution were considered eligible for the tuition tax credit. As a small consolation, the CRA did suggest that if you are a self-employed professional, the exam fees might qualify as an eligible capital amount if they are paid in respect of your business or profession.

However, the 2011 federal budget contained amendments that will allow examination fees paid to a professional association, provincial ministry, or other institution for an examination required to obtain a professional status recognized by federal or provincial statute, or to be licensed or certified to to practice a trade or profession in Canada. These amendments apply to examinations taken in 2011 and subsequent taxation years.

 

Private School = Tax Break?

It’s back-to-school season and that means time for that question we hear quite a bit over at The Tax Issue desk. Some folks are often surprised and a bit miffed when they discover that tuition fees only provide a tax credit when they are paid in respect of post-secondary education.

So where does that leave the parents of children who attend those oh-so-expensive private elementary and high schools? Generally, these fees provide no tax credit or deduction; however, there may be another way….

Could it be a Donation?

The most common alternative is that part of what we call tuition may sometimes be considered a charitable donation. It is therefore common for private schools to issue official donation receipts to parents paying private school tuition.

This practice is fraught with danger for both the payer and the school. In order for a payment to qualify as a donation, the gift must be made voluntarily and without expectation of return. No benefit of any kind may be provided to the donor or to anyone designated by the donor. Where any “donation” is mandatory as part of tuition, it is really not a gift for income tax purposes. The CRA and Revenue Quebec have both had their battles with taxpayers and private schools regarding this issue.

If a school is also a registered charity, the issuance of donation receipts for what really amounts to a portion of tuition is not, contrary to popular myth, a qualifying charitable donation.

The only exception to the above is where all or a portion of the tuition fees are in respect of religious studies. For federal tax purposes only (Quebec does not grant this concession) that would be considered as a qualifying donation, and a separate donation receipt may be issued for the religious studies portion of the annual tuition.

How About a Medical Expense?

The next alternative is not quite as popular as the charitable donation, and that is to claim the private school tuition fees as medical expenses.

The law allows as a medical expense an amount paid for care and training at a special school. A clear example would be a school dedicated to children with hearing deficits, such as the Montreal Oral School for the deaf.

A not-so-clear-example, is where a child has a learning disability, such as attention deficit disorder, and is placed in a private school offering tighter structure and smaller classes, where, perhaps the staff has had some training in dealing with such students.

This was the subject of the case of The Queen v. Scott . The taxpayer’s son was diagnosed with several learning disabilities. The court of appeal laid out the requirements for deductibility as follows:

  1. The taxpayer must pay an amount for the care or care and training at a school, institution or other place.
  2. The patient must suffer from a handicap.
  3. The school, institution or other place must specially provide to the patient suffering from the handicap, equipment, facilities or personnel for the care or the care and training of other persons suffering from the same handicap.
  4. An appropriately qualified person must certify the mental or physical handicap is the reason the patient requires that the school specially provide the equipment, facilities or personnel for the care or the care and training of individuals suffering from the same handicap.

The requirements in 3 and 4 above were at issue in the Scott case. Firstly, the private school was not a school specializing in children with learning disabilities. Rather it was a private school which offered smaller classes and other services to a wide range of students. The fact that some of the services offered to the general student body were beneficial to the taxpayer’s son and other students with special needs was not sufficient to bring the private school within the ambit of the provision.

Next, the fact that a doctor had recommended this particular school to the taxpayer was also not sufficient. The rule requires a “certification” by a qualified person. A mere recommendation did not meet the criteria, which, according to the court, would have required a formal expert opinion specifying the condition and reasons why this particular school had the equipment or personnel to treat the patient.

What’s Your Tax Issue? Tuition Fees

The Tax Issue:

I am enrolled in a university course on an audit basis. I’m allowed to attend the lectures, and receive course material, but I do not write any exams and I get no mark. It’s half the regular fee for a course, and I’m wondering if the fee can be deducted?

The Answer:

The general rule for the tuition fee credit is that the fee must be paid to a university (or a certified post-secondary institution), must be over $100 and must cover a period of not more than 12 months. Provided these requirements are met, the CRA takes the view that fees for auditing courses are eligible for the tuition credit.

Another question arises as to whether the time spent in auditing a course would qualify  for the education credit – $400 per month for full-time and $120 per month for part-time attendance. That would probably depend on the structure of the course, and whether you would be considered to be a student attending the class. It would seem that if the tuition qualifies, then the course would also qualify for the education tax credit if your time is actually spent attending the class.

Interestingly, the tuition fee credits require hat you be enrolled in a Canadian university. The rules are a bit different for foreign universities.  Here, you must attend the university and the course must lead to a degree.

Recently, the question of attendance in a university has been the focus of some commentary. The question is, are you “attending” a university if you are taking a correspondence or online course. In the case of Valente (2006 DTC 2685) the Tax Court ruled full-time attendance can be done through the internet.

The CRA has recently published an opinion stating that a student enrolled in a university outside Canada and taking courses over the internet may be able to claim a tuition tax credit provided that student is able to demonstrate that their attendance over the internet constituted “full-time attendance”.