Are Scholarships Taxable In Canada?
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Are Scholarships Taxable in Canada?

    are scholarships taxable in Canada

    We all are of the fact that scholarships and other related financial aid as well as tuition waivers can provide great financial relief for students. In this article, what we want to dig out is: are scholarships taxable in Canada?

    Are Scholarships Taxable in Canada?

    Quite unlike student loans, scholarships and grants are non-refundable payments giving or awarded to students in the form of gift or aid. Gift aids allows students to be able to cover some if not all of their educational expenses, reducing or virtually eliminating amounts the student has to spend from personal savings or income as the case may be.

    The fact that students don’t need to worry about repaying scholarships and grants doesn’t entail that the need not worry about whether or not these gift aids are taxable. There are cases where these amounts need not be reported, other cases, however, demand that these amounts be reported and hence making scholarships and grants under this category taxable.

    While some countries do not consider scholarships and grants under taxable income, the Canada Revenue Agency (CRA) considers scholarship amounts as income and hence should be reported on the student’s tax return.

    How do you know if a scholarship is taxable?

    So, how do you know if a scholarship is taxable? There are some general conditions that warrant scholarships and grants as non-taxable income. These conditions include:

    1. Scholarship awarded to students pursuing degree programs.
    2. When the student is using the awarded funds for what can be qualified as “educational expense” by the IRS. Qualified “educational expense” in this case includes expenses ranging from the purchase of books to other program-related expenditure.

    What are Qualified Education Expenses?

    A number of expenses incurred students can be classified under “qualified education expenses”, hence making scholarships and grants covering theses said expenses tax-free. The IRS has this among the qualified education expenses:

    1. Enrollment and Tuition fees. Other institution related mandated fees also inclusive.
    2. Course related fees such as technology fees, lab fees, and cost of textbooks. Other fees such as supplies can only be qualified education expenses if they are general requirements for all students.

    Things that a student may need personally such as room or board, travel expenses, and things like buying a new laptop computer are not considered as qualified education expenses even though they form part of the cost of attending school. Any scholarship that covers these latter costs is regarded as taxable income.

    Are scholarship stipends taxable?

    Generally speaking, scholarship money is tax-free as long as it is awarded to degree candidates who are dully enrolled in an eligible institution of learning. The eligibility of the institution means that the institution is one with a regular faculty, curriculum and enrolled students.

    Scholarships that are tax free

    In Canada, some scholarships are tax free, absolutely. Some of these non-taxable scholarships include:

    • Elementary and secondary school scholarship awards, grants and bursaries.
    • Post-secondary school scholarships, fellowships and bursaries.
    • Scholarship awarded to degree candidates at eligible institutions of learning.
    • Scholarship amounts used for qualified expenses.
    • Money which doesn’t represent wages for teaching or any other job engagement.

    Some recipients of artists project grant may be exempted from tax when claims are channeled to appropriate department.


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