Funding Opportunities for Trades Workers
25 Taxation of Grants, Bursaries, and Scholarships
Anne Lee
Most grants, bursaries, and scholarships will require the trade worker’s Social Insurance Number (SIN) in order to be issued the award. In the following year, a T4A – Statement of Pension, Retirement, Annuity, and Other Income tax slip will be issued to the recipient so the amount is reported as income.
In Canada, one can begin trades school training and become a trade apprentice while still in high school. The scholarship or bursary awarded to trade apprentices in connection to being in a secondary school education program is excluded from income for tax purposes.
Even though all the various types of financial aid constitutes funds that the recipient does not have to repay, it is imperative to understand and estimate the actual amount of net cash one will receive. There are some taxable grants that are issued the full gross amount to the recipient, but then insufficient taxes are withheld at the beginning. When the tradesperson files the tax return the following calendar year, it may be surprising that there is a significant tax liability owing to Canada Revenue Agency in which has not been budgeted for.
There is a scholarship exemption for amounts received if the individual is enrolled in an education program as a full-time student. If a scholarship or bursary is received related to a part-time qualifying student, then the scholarship exemption is limited to the tuition paid plus the costs of program-related materials.
Example: Bursary, Full-Time Qualifying Student
Riley receives a cash bursary of $1,500 from a Construction Regional Association. Riley is currently a full-time Foundations student in a Construction related field of Carpentry and is not in secondary school. The amount of the bursary is greater than the basic exemption of $500. Riley will be issued a T4A – Statement of Pension, Retirement, Annuity, and Other Income tax slip in the following year so that the bursary is reported to CRA. As Riley received the bursary as a qualifying student, the $1,500 of income will be exempt from tax.
If one is not a qualifying student and has received educational assistance, there is still a $500 basic scholarship exemption. The exemption is limited to the lesser of $500 or the amount of award that an individual actually receives.
Example: Scholarship Exemption $500
John is awarded a scholarship of $1,500 from a non-profit society. He is not attending an educational institution as a full-time student, and would not be considered a qualifying student. John will be issued a T4A – Statement of Pension, Retirement, Annuity, and Other Income tax slip in the following year so that the scholarship is reported to CRA. $500 of the award is exempt from taxable income for John, and only $1,000 (the portion greater than $500) would have to be reported as total income on the tax return.
