How do Stipends work?
The following information on stipends in Canada was prepared by Experience Education's research accountant. The information below was prepared on 1 September, 2016 - rules, regulations, and interpretations may change.
The stipend payments described below are for a placement arranged by Experience Education. Our stipend programs are in support of unpaid internships ("practicums" in BC), placements that are required by the school curriculum and are a mandatory component of studies. These placements are approved by the school and student duties are controlled by the school via the Practicum Placement Agreement. Host companies in stipend programs consent to host students for the duration of their placement, and cannot remove them from placements - such a move can be undertaken by the school only. Hosts do not base continued performance of the practicum on an evaluation of the student's work - however they do prepare a final evaluation of the student's performance for academic purposes.
The rules below describe a placement that meets all of the above conditions; it does not describe any other form of stipend program.
Student stipends are not employee wages and the payer is not responsible for any income tax or employment related deductions. Stipends are paid to students for the purpose of allowing the student to further his/her program or academic requirement.
Tax Treatment Overview
Student Stipends are treated as a scholarship/bursary/awards/fellowship income for income tax purposes and as such the host company will generate a T4A slip for this income.
Federal Income Tax Treatment (Host Company)
It is the obligation of the host company to issue a T4A and abide by the policies of the internship program. Amounts paid are a tax deductible expense with respect to ITA paragraph 18(1)(a).
Students who receive full-time months on the T2202A qualify for the full-time education amount credit and students who receive part-time months on the T2202A qualify for the part-time education amount credit are tax exempt on scholarship/bursary/awards/fellowship income to the extent of their education tax credit (the amount the student paid in tuition, plus any CRA prescribed education costs).
Students who are not eligible for the part-time or full-time education amount credit may claim only the $500 exemption.
In calculating the taxable amount of your student stipend, add scholarship/bursary/awards/fellowship income from all sources and subtract any education tax credit or $500. The remaining amount is taxable and should be reported on line 130 of the T1 income tax return.
Students receiving stipends should receive a T4A indicating the scholarship/bursary/awards/fellowship income to be reported for the period.
Please see S1-F2-C3, Scholarships, Research Grants and Other Education Assistance and ITA paragraph 56(1)(n) for more information.