Let parents claim the tax credit their kids can’t use

Full-time students with little or no income cannot use the Basic Personal Amount. This column argues the unused federal credit should transfer to a parent or grandparent who is already paying the bills.

Canada’s tax code already knows how to do this. It’s time to extend the same logic to students.

Every year, many Canadian students earn little or no income while studying full-time. Like every other taxpayer, they are entitled to the Basic Personal Amount, which in 2026 shields up to $16,452 from federal income tax.

For a student with no paycheque, though, that protection is worth nothing. You can’t reduce a tax bill you don’t have.

Meanwhile, a parent may be paying for groceries, housing, transportation and whatever tuition isn’t covered by loans, grants or scholarships. Yet the student’s unused tax credit simply disappears.

Why?

Canada already allows unused tax credits to move within families in other circumstances. The Disability Tax Credit can be transferred to a supporting family member when the person eligible for it cannot use the full amount themselves. Tuition offers another example: students must first use the amount they need to reduce their own taxes, but can then designate up to $5,000 of unused current-year tuition to a parent or grandparent.

The principle is hardly radical. Use what you need. Transfer what you don’t.

We should apply it to the Basic Personal Amount for full-time students under 25.

A student would first use whatever portion of the Basic Personal Amount is needed to eliminate their own federal tax. If there is an unused amount left, they could designate it to a supporting parent or grandparent, much as they can with tuition today.

For a student with no taxable income, the maximum federal value of that transfer would be about $2,300 in 2026.

That is not a new benefit pulled out of thin air. It is a tax credit the student already has and cannot use.

There should also be an important limit: only the unused portion should be transferable.

If a student works part-time, earns enough to owe tax and needs most of the Basic Personal Amount themselves, they keep it. Their work should not suddenly become taxable from the first dollar because someone else wants their credit. Whatever amount is needed to reduce their own tax comes first. Only the remainder moves.

That makes the proposal simpler than trying to determine which parent paid what percentage of the grocery bill or whether a student living away at university is still sufficiently “dependent.” The Canada Revenue Agency does not need to referee the family finances.

Require full-time enrolment. Set an age limit. Have the student file a return, use the Basic Personal Amount they need themselves and designate any remainder to an eligible parent or grandparent.

We already ask students to do essentially this with tuition.

It also better reflects what becoming financially independent looks like now.

A 20-year-old attending university full-time may be an adult in every legal sense while still depending heavily on family support. Amid inflation and a cost-of-living squeeze that hits middle-class households hard, that $2,300 in tax relief is needed by the parents footing the bill. Housing costs have made living at home longer increasingly ordinary, and education stretches well beyond high school. Some students work throughout school; others can’t earn enough to come close to using the tax credits available to them.

Our tax system should be able to recognize both realities.

A student earning income should keep the tax protection they need. A student who has no income to protect should be able to direct the unused portion to the family member helping support them.

That is considerably more defensible than creating a special tax exemption for everyone under 25. It preserves the principle that income is taxed to the person who earns it while recognizing that an unused non-refundable credit has no value at all to someone with no tax payable.

We do not need to invent a new grant or benefit program to do this. The tax code does not need to decide that young adults aren’t adults. It simply needs to acknowledge something families already know: sometimes the person holding a tax credit isn’t the person carrying the financial load.

Let the student use what they need.

Then let the rest follow the money.