This article written by M. Lori Adams, MBA, JD, first appeared in CCH's Provincial tax News newsletter no. 5, dated October 2011.
Provincial governments in several regions of Canada have struggled for years with the issue of university and college graduates leaving their home province in search of better employment opportunities in other parts of Canada or the United States. In an attempt to combat this brain-drain, five provinces have introduced tax incentives designed to encourage students to work in their home province following graduation and even to attract graduates from outside the province. This article provides an overview of the available incentives and is part of a series of Provincial Tax News articles providing cross-jurisdictional comparisons of various income tax credits.
Although these incentives are not standardized across jurisdictions, they do have some things in common. Firstly, they are all provided as a credit against, or rebate of, provincial income tax and therefore require graduates to live in that particular province in order to benefit. Secondly, they are all structured to be paid out over a period of several years. Finally, none of these credits are restricted to graduates who are originally from that particular province or who attended school there.
Saskatchewan Graduate Retention Program
Saskatchewan was the first province to introduce a post-secondary graduate tax credit in 2000. Although the initial credit was not particularly generous, Saskatchewan’s program has been redesigned and renamed twice, bringing it more in line with the increasingly generous incentives offered by other provinces.
Since 2008, the current Graduate Retention Program has provided post-secondary graduates with a tuition rebate in the form of a refundable credit claimed on the graduate’s income tax return. Eligible post-secondary programs must be at least six months in duration and must either result in a certificate, diploma, or undergraduate degree, or provide certification to a journeyperson. Unlike the other provincial incentives, Saskatchewan does not provide an incentive for master’s or doctorate degrees. The program was originally restricted primarily to graduates of Saskatchewan schools, but this restriction was removed in October 2008.
The rebate is equal to the actual amount of tuition paid, subject to maximum rebate amounts which vary based on the program of study, as set out below. However, since the program was not fully implemented until 2010, students who graduated before then receive only a portion of these amounts.
- Programs less than two years, including journeypersons — $3,000
- Two or three-year certificate and diploma programs — $6,400
- Three-year undergraduate degrees — $15,000
- Four-year undergraduate degrees — $20,000
Students who graduate from more than one program can claim tuition rebates for each program. However, there is a lifetime cap of $20,000.
In order to receive the full benefit of the rebate, a graduate must generally remain in the province for seven years after graduation since 10% of the tuition is rebated in each of the first four years after graduation, and 20% in each of the remaining three years.
For further information, see Saskatchewan’s Graduate Retention Program website at www.aeel.gov.sk.ca/grp.
Manitoba Tuition Fee Income Tax Rebate
Manitoba provides a 60% tuition fee rebate to graduates who obtain a degree, diploma, or certificate on or after January 1, 2007, from a recognized post-secondary institution. Schools may be located anywhere in the world, as long as the program is recognized by the Canada Revenue Agency as eligible for the federal tuition tax credit.
The rebate is paid in the form of a non-refundable tax credit, and is claimed directly on the graduate’s income tax return. Graduates may claim up to 10% of eligible tuition fees per year, to a maximum of $2,500 per year. Accordingly, it will take at least six years for graduates to receive the full 60% rebate. The maximum lifetime rebate is $25,000, which is equivalent to a 60% rebate on tuition fees of $41,667. Students who graduate from more than one program can claim a rebate for tuition paid to each program, subject to the $25,000 lifetime maximum. Graduates who do not have enough taxable income to claim the full credit in the years immediately following graduation can carry forward unused amounts for up to 20 years.
For 2010 and subsequent taxation years, Manitoba post-secondary students can claim an advance on the tuition fee rebate. The advance is provided in the form of a 5% refundable advance tuition fee tax credit. The advance is available for tuition and fees paid in relation to a school term that ends after November 2010. There is an annual cap of $500 and a lifetime cap of $5,000. Any advance claimed will reduce the lifetime maximum claimed under the rebate following graduation.
Details of this program are available on the Manitoba Finance Web site at www.gov.mb.ca/tuitionrebate.
New Brunswick Tuition Rebate
New Brunswick provides post-secondary graduates, who live and work in the province, with a rebate of up to 50% of tuition paid since January 1, 2005. The amount of the rebate was doubled in 2009, and currently provides an annual rebate of up to $4,000 with a lifetime maximum of $20,000. If a recent graduate does not owe sufficient New Brunswick tax to claim the maximum annual rebate, unused amounts may be claimed within 20 years of when the tuition was paid.
The rebate is available for graduates who obtain a degree, diploma, or certificate from an educational institution anywhere in the world, as long as the school is eligible for the federal tuition tax credit. Students who graduate from more than one program can claim a rebate for tuition paid to each program, subject to the $20,000 lifetime maximum.
Unlike the other provincial incentives, New Brunswick’s Tuition Rebate, also known as the Tuition Tax Cash Back Credit, is not claimed directly on the graduate’s income tax return. After filing an income tax return and receiving a notice of assessment showing New Brunswick tax payable, a graduate must submit a rebate application to the New Brunswick Department of Finance and will receive the rebate by cheque or direct deposit. Application forms and further information are available on the Government of New Brunswick Web site at www.gnb.ca/0162/tax/NBTR/ NBTTCBC-e.asp.
Nova Scotia Graduate Retention Rebate
For students graduating in 2009 or later, Nova Scotia’s Graduate Retention Rebate replaces the former Graduate Tax Credit that had been in effect since 2006. The new program provides a non-refundable tax credit for graduates choosing to live and work in Nova Scotia, regardless of where they studied, as long as the school was a designated educational institution under the Canada Student Financial Assistance Act.
The rebate is only available for the year of graduation and each of the following five years and, unlike other provinces, Nova Scotia does not allow unused credits to be carried forward for use in subsequent years. Therefore, graduates who do not have sufficient taxable income in the years immediately following graduation will not receive the full benefit.
University graduates (including bachelor’s, master’s and doctorate degrees) are eligible for a tax reduction of up to $2,500 per year, for a maximum of $15,000 over six years. College diploma and certificate graduates are eligible for a tax reduction of up to $1,250 per year, for a maximum of $7,500. Unlike other provinces, the amount of this credit is not dependent on the amount of tuition paid. Graduates can only claim this credit for one degree, diploma, or certificate, even if they graduate from more than one eligible program.
The rebate is claimed on the graduate’s income tax return. Further information is available on the Nova Scotia Finance Web site at www.gov.ns.ca/finance/en/home/taxation/personalincometax/grr.aspx.
Quebec Tax Credit for Recent Graduates Working in Remote Resource Regions
Quebec’s graduate tax incentive is different from the others in that it only applies to graduates working in the following remote resource regions: Bas-Saint-Laurent; Saguenay-Lac-Saint-Jean; Abitibi-T´ote-Nord;
emiscamingue; CˆNord-du-Qu´esie-Iles-de-la-Madeleine; the urban agglomeration of La Tuque; and the regional county
municipalities of Antoine-Labelle, Vallee-de-la-Gatineau, Mekinac, and Pontiac.
Quebec’s credit is also different in that it is based on the graduate’s eligible wages rather than on tuition paid. In 2006, Quebec replaced its refundable credit, which had been available since 2003, with a non-refundable credit equal to 40% of the recent graduate’s eligible wages, to maximum of $3,000 per year with a cumulative maximum of $8,000. To be eligible, post-secondary graduates must reside in a remote resource region and hold a job in that region related to their field of specialization which they started within 24 months of graduation.
The credit is available to graduates with a degree, diploma, certificate, or attestation of studies from a Quebec educational institution or from an institution outside Quebec for which the Minister of Immigration and Cultural Communities has issued an equivalence . A list of recognized credentials is set out on Form TP-776.1.ND-V, Tax Credit for Recent Graduates Working in Remote Resource Regions, which must be filed with the graduate’s Quebec income tax return in order to claim the credit. The form and additional information are available from the Revenu Qu´ebec Web site at www.revenuquebec.ca/en/citoyen/credits/credits/credits_reduisant/nouv_diplome.