tuition credit

[unionjack]

Thanks for your help with my last question, Nelsona. After telling my sister about you and this forum I have another one.

She goes to university in US, but is Can. tax resident. Her school gives her free tuition (calls it a 'tuition fellowship' but basically the school pays itself; it doesn't give her money that she then has to pay back for tuition.) She didn't think she needed to declare it for the past two years. But she has a Can. friend at a US university who was just told by someone at CRA that her tuition fellowship was taxable last year. It's a big amount and bumps her into a higher bracket. As a result the tuition credit doesn't eliminate all the extra tax. She doesn't have that much income (as student), so she's concerned (as is her friend, I'm guessing) and is trying to figure out if she needs to correct her last two returns. I just read through CRA's bulletin on tuition credit (IT 516R2) and, as far as I can tell, parag 16 seems to contradict what the CRA told her friend. It implies that 'free' tuition doesn't have to be declared, as long as the tuition credit isn't claimed. I know this is really specific, but do you know about this issue? Am I reading the bulletin right (and was the person at CRA wrong?) Thanks for any help you can offer.

[unionjack]

I just read (re CRA) that fellowships are all nontaxable as of 2006. That still leaves 2005 though. Does my sister need to correct her 2005 return to declare 'free' tuition? Thks.