When you hire a Co-op student, you may qualify for a tax credit from the Ontario and Canadian Federal Governments.

In Ontario, the Co-operative Education Tax Credit (CETC) allows you to deduct 25-30% of salaries, wages, and benefits to a maximum of $3,000 for each qualifying Co-operative Education work term. CETC is administered by the
Ministry of Finance, Corporations Tax Branch, (905) 433-6513, website: http://www.rev.gov.on.ca/english/credit/cetc/

(Please note the credit has recently been increased from $1,000 to $3,000 and the Ministry website does not yet reflect the increase. The necessary legislative amendments are contained in Schedule 28 of Bill 162, the Budget
Measures Act, 2009 (Ontario), which received Royal Assent on June 5, 2009.)

The Canadian federal government provides income tax incentives to Canadian companies that conduct scientific research (SR) and experimental development (ED) in Canada. The program encourages industry, including small business and start-up firms, to develop technologically advanced products and processes in Canada.

If the research and development your company is doing qualifies, the federal tax credit can include the salary for a Co-op student involved in the research process.

Canadian-controlled private corporations with less than $200,000 of taxable income can receive a refundable investment tax credit of up to 35% (enriched rate) for qualifying SR & ED expenses. An enriched refundable claim has a limit of $2 million.

Other Canadian corporations, proprietorships, partnerships, and trusts can receive an investment tax credit of up to 20% for qualifying SR & ED expenditures.

The program is administered by Canada Customs and Revenue Agency, Toll-free: 1-800-959-5525 (Business Enquiries and Registrations), 1-800-959-2221 (Forms and Publications), Web site: http://www.cra-arc.gc.ca/menu-e.html