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Overview — Canadian Students Cannot Pay for Multiple Years of Foreign Tuition, Then Claim Overpayments on Current-Year Taxes
In Ojaide v. The King, 2025 TCC 180, the Tax Court of Canada addressed a specific but practical issue: whether a taxpayer can inflate a tuition tax credit for a taxation year by paying more than the actual tuition owed for that year.
The taxpayer was enrolled full-time in a PhD program at a university outside Canada (University of Leicester, located in Leicester, England). He paid more in 2022 than the 2022 tuition balance, with the overpayment applied to future tuition. He then claimed the 2022 tuition credit based on the full amount he paid in 2022. The CRA reassessed, limiting the eligible amount to the tuition that related to 2022, and the Court agreed with the CRA.
This decision is important because many students, especially those studying abroad, pay tuition in lump sums, in advance, or across academic terms that span calendar years. Ojaide confirms that the timing of payment is not the key factor. The key factor is whether the tuition was paid "in respect of the year."
For taxpayers and advisors handling tuition credit claims, particularly when foreign institutions apply payments across academic periods or carry forward overpayments, the case underscores the importance of seeking early advice from an experienced Canadian tax lawyer to verify eligibility, properly document the allocation, and avoid costly CRA tax reassessments that could be difficult to correct later.
The Core Rule — "Paid in Respect of the Year"
The tuition credit for a foreign university degree program appears in paragraph 118.5(1)(b). The key point is that the credit is calculated using tuition fees "paid in respect of the year." The taxpayer argued that the words "tuition paid in respect of the year to the university" in paragraph 118.5(1)(b) of the Income Tax Act allow him to base his calculation on an amount that includes tuition owing for a different taxation year. Conversely, the CRA stated that paragraph 118.5(1)(b) of the Act limits the tuition amount to tuition owing for the current taxation year.
Ojaide confirms that paragraph 118.5(1)(b) connects the tuition credit to fees paid in respect of the taxation year, not just amounts paid during that calendar year. The Tax Court interpreted the phrase "in respect of the year" as linking the eligible tuition amount to the tuition owed for that same year, even when a program's billing or academic periods do not align precisely with the calendar year.
Based on that reasoning, if a taxpayer pays more than the tuition amount attributable to 2022 and the excess is applied or credited to tuition owing for 2023, the surplus payment is not "in respect of" 2022. It pertains to a future year and cannot be used to boost the 2022 tuition credit, even though the funds were sent in 2022.
Pro Tax Tips – Student Impact — Common Foreign Tuition Scenarios That Trigger Problems
Ojaide is especially relevant for students studying at universities outside Canada because foreign tuition is often billed and paid in ways that do not align neatly with a Canadian taxation year. Many students pay tuition in monthly installments, make lump-sum payments to avoid exchange-rate risk, or accidentally overpay and carry a credit balance forward.
Ojaide confirms that these payment methods do not determine the outcome of the tuition credit. What matters is whether the amount paid is correctly linked to the tuition owed for the specific taxation year in which the credit is claimed.
In practice, the risk goes beyond legal interpretation to the paper trail. When a university account statement shows an "account credit," "advance payment," or "payment applied to next year," the CRA often considers this clear evidence that the excess payment pertains to a future year.
For students, this can lead to an unpleasant surprise during tax reassessment, notably if they claimed the full cash paid in the year without tracking how the university actually applied the payment. For example, student scenarios where this issue arises include:
- Overpayments carried forward (for example, paying more than the annual tuition and having the excess credited to the following year's tuition).
- Large upfront payments made early in the program (for example, paying two terms or an entire year at once), where part of the amount effectively relates to the following taxation year.
Since these situations are everyday and can significantly impact cash-strapped students, early review by an experienced Canadian tax lawyer can be very helpful. The aim is to verify—before filing—how the tuition was allocated, which part relates to each year, and whether the student's supporting documents will pass a CRA review.
This is one of those cases where a quick review by a Canadian tax expert can prevent a reassessment that may be difficult to fix after the return has been submitted.
FAQ — Key Questions on Tuition Credit Disputes
If I paid tuition in 2025, can I always claim it in 2025?
Ojaide confirms that the relevant question is whether the tuition was paid "in respect of" the year being claimed, not simply whether the payment was made during that calendar year.
For example, if you pay $12,000 in December 2025 but your university applies $9,000 to 2025 tuition and carries forward $3,000 as a credit toward 2026 tuition, you generally cannot use that $3,000 to increase your 2025 tuition credit merely because it was paid in 2025. The carried-forward portion would generally relate to 2026.
What if I overpaid and the school applied the extra to next year?
That overpayment generally relates to the future year, so it should not increase the current year's tuition credit.
What documents should I keep if I overpay tuition or my payment is carried forward to the next year?
Keep the relevant documentation showing exactly how the university applied the payment—especially your university account statement or ledger showing any "credit," "carry-forward," or allocation to a subsequent year.
If the statement shows the payment was applied to the following year's tuition, that "application" evidence can be decisive in determining which year the tuition credit may be claimed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
