Are Scholarships Taxable in Canada?

Scholarship opportunities are one of the easiest ways to advance one’s education in Canada, especially for those from less financially buoyant homes.

Many students are worried about whether scholarships in Canada will be taxed.

Here, I’ll provide a clear answer to that demanding question.

However, providing a straightforward answer to the question might be a challenge.

This is because, in Canada, the taxation of scholarships, bursaries, and grants is determined by several criteria.

These criteria include the nature of the scholarship, the student’s enrollment status, and the precise expenses for which the scholarship is intended.

Understanding these distinctions might help you, as a student, and your family negotiate the tax consequences of financial awards more efficiently.

Let’s take a cursory look at them all.

Full-time versus part-time students

Full-time students

Scholarship income for full-time eligible students is typically not taxable in Canada.

If you are enrolled in a full-time program at a qualifying educational institution in Canada, any scholarship income you get to cover tuition, books, and other educational expenses is tax-free.

This exemption is applicable to scholarships, bursaries, grants, and fellowships.

Part-time Students

For part-time students, the scholarship exemption is limited to tuition and associated expenditures.

The amounts may be taxable if the scholarship includes non-educational expenses, such as living expenses.

Part-time students can benefit from the basic $500 scholarship exemption, which reduces the taxable amount that must be reported.

Determining Scholarship Exemption

To determine if your scholarship is taxable, examine the following factors:

• Program Length: The length of your academic program may influence the tax status of your scholarship.

• Terms & Conditions: Review the scholarship’s particular terms and conditions to determine what expenses are covered and whether they are taxable.

• The support term of the scholarship can also impact its tax status.

Reporting Scholarship Income.

Use the tools offered on the Canada Revenue Agency’s (CRA) website to determine whether you must record your scholarship income on your tax return.

The CRA has provided a detailed guide (P105—Students and Income Tax) to assist you in determining if your scholarship income is taxable.

Example Calculation:

If you get $1,500 in scholarships, as shown on your T4A form, you can use the basic $500 scholarship exemption.

You would record the remaining $1,000 ($1,500 minus $500 = $1,000) on line 13010 of your tax return.

Specific Scenarios and Tax implications

The tax status of your award may differ depending on the award’s type and enrollment status.

Here’s the breakdown:

 

Type of award	Tax Exemption	Action
Award given for attending a full-time program in 2022, 2023, and 2024	Yes	You don’t need to report the award income on line 13010 of your tax return.
Award given in elementary or secondary school	Yes	You don’t need to report the award income on line 13010 of your tax return.
Award given while in a part-time program	Maybe	The award is tax-exempt if the tuition and related costs are equal to or less than what you paid. You can apply for the basic $500 scholarship exemption. Any taxable amount should be included on line 13010 of your tax return.
Artist’s project grant	Maybe	The amount is tax-exempt if it’s less than or equal to your tuition and eligible program-related fees combined. Any taxable amount should be included on line 13010.
Research grant in a post-secondary program	Maybe	If this award helped you receive a college/CEGEP diploma, bachelor’s, master’s, or doctoral degree, then this amount should be included on line 10400—Other employment income.
Post-doctoral fellowship	No	Report the amount on line 13010 of your tax return.
Apprenticeship grant, along with either: Apprenticeship Incentive Grant (AIG) Apprenticeship Completion Grant	No	Report the amount on line 13010 of your tax return.

 

Critical Points of Tax Exemption

• You are tax-exempt if your award is for full-time program attendance in 2022, 2023, or 2024.
• You won the prize during elementary or secondary school.
• You may be tax-exempt if your award is for part-time program attendance and equals or less than tuition and related fees.
• You have received an artist’s project grant that is less than or equal to tuition and eligible program-related costs.
• You earned a research grant to help you get a college/CEGEP diploma, bachelor’s, master’s, or doctorate degree.
• You are not exempt from taxes if you earned a post-doctoral fellowship.
• You got an Apprenticeship Grant in addition to the Apprenticeship Incentive Grant or Apprenticeship Completion Grant.

Frequently Asked Questions

1. Are Grants Taxable Income in Canada?

Generally, grants for research, education, or business purposes are considered taxable income in Canada.

However, some grants may be exempt depending on their nature and use. It’s best to consult with a tax professional for specifics.

2. Is a PhD Stipend Taxable in Canada?

Yes, PhD stipends are typically considered taxable income in Canada. The amount you receive is usually subject to income tax, though you might be eligible for specific discounts or benefits associated with your studies.

3. What Is the Difference Between a Bursary and a Scholarship in Canada?

A bursary is a financial aid based on need, meant to help students who require financial assistance.

A scholarship is merit-based and awarded to students for academic or other achievements.

Conclusion

Understanding the tax implications of scholarships, bursaries, and grants is critical for students in Canada.

Knowing whether your financial awards are taxable allows you to better prepare for your financial future while ensuring compliance with CRA laws.

For further information, see the CRA’s P105 — Students and Income Tax Handbook, and use the CRA website to calculate your unique scholarship exemption.