Scholarship income

Scholarships received by a primary or secondary school student as well as scholarships received by a student registered in a program entitling him/her to the education tax credit (see topic 87) are tax-free. There’s a $500 exemption in other cases. A post-secondary program that consists principally of research is only eligible for the 100% scholarship exemption if it leads to a college or CEGEP diploma, or a bachelor, masters or doctoral degree (or an equivalent degree). Accordingly, post-doctoral fellowships will generally be taxable.

Employers often provide scholarships to assist with the education costs of certain of their employees’ children. The CRA’s position is that where an arm’s-length employer provides a post-secondary scholarship, bursary or free tuition to family members of an employee under a scholarship program, the amount will be included in the particular student’s income (subject to the above exemption) and not the employee’s income as a taxable benefit. However, where the scholarship or bursary is used to fund attendance at an elementary or secondary school (private or otherwise), the amount will be treated as a taxable employment benefit to the particular employee.