Scholarships are a lovely thing. Well, I guess they’re a lovely thing only when you receive them, in which I don’t have much experience with. In addition to personal income earned, scholarships can help alleviate the financial burden that many post secondary students face. However, the potential tax implications that these extra funds may come as a surprise when filing your personal income taxes.
Every post secondary student who has been enrolled in at least one semester from the last year will receive a T4A tax slip from their education institution before March of the current year that shows the scholarship amount received, and if any monies are required to be filed during the personal income tax filing process. In summary, this amount will depend on the length of the program, any conditions or stipulations around the scholarship itself in terms of how the funds should be used, the period of time over which the scholarship applies to, and whether the student is enrolled full time or part time.
Generally speaking, students who receive scholarships who are enrolled in a post secondary full-time program are not subject to any personal income tax on the scholarship monies they receive (I say generally speaking because different rules apply if a scholarship was received through an employer, or if a student is a Quebec citizen since this province has different rules around how tuition is taxed). This exemption not only applies to scholarships, but also to bursaries or other financial rewards for full time post secondary education. Of course, it goes without saying that the scholarship has to be dedicated to the full-time program that the student is enrolled, otherwise it will be subject to income tax.
For part time students, the tax exemption rules for scholarships are a bit different. Scholarship amounts can be subject to tax, and the amount is dependent on the money spent for part time program tuition and text books. The Canada Revenue Agency provides a simple table to estimate the amount of scholarship dollars subject to income tax based on tuition and other school related expenses (Scholarship Exemption Part-Time Enrollment).
So, why should I care about these tax implications? After all, it seems like only a select few students actually receive scholastic awards.
Although common belief says otherwise, scholarships are not just for “smart kids”, and students may be surprised at how many awards they are actually eligible for. As mentioned in Lesson 19, Many students are not aware of the ample number of scholarships available out there for post secondary students. Speaking from experience, I felt like there were many open scholarships that were not known to a lot of students and not well “advertised”. Half the time, it almost felt like there was free money on the table, and yet nobody was there to claim it. Educational institutions will usually have a searchable database or a summarized list of all possible scholarships offered every year per program or discipline. For each scholarship, there is usually a list of criteria that an applicant must meet in order to be eligible for the award. A lot of the time, scholarships will be specific to part time or full-time students, gender, financial need, GPA requirements, or other detailed considerations. Some may even require resumes, transcripts, or a letter of intent.
However, there are a lot of scholarships that have almost no criteria, and simply require evidence of enrollment in some post secondary program, or a low GPA requirement. These are the cases where money is left on the table a lot of the time. My one piece of advice to any post secondary student, or someone entering post secondary, is to take the time and do a thorough search for scholarships. Spend a few hours collecting a list of possible awards that one may be eligible for, and put together the one or two letters of intent required for some of the applications. This is also a good opportunity to clean up the old resume, and to update your employment history from Grade 10 when you worked at Home Depot.