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Tax Tips for Students
By TaxServices@AccXpert.com
As a student, even if you have little to no income in the year, filing a tax return has its advantages — it’s the only way to receive all the benefits that are available to you.
If you are 19 or over, you are eligible for the annual GST/HST credit. To obtain this money, which is paid in quarterly installments, you have to apply for it by filing a tax return and completing the GST/HST application section of your return. If you are turning 19 before April 1, 2010, make sure you apply for the credit on your 2008 tax return.
Some provinces provide tax credits for low-income taxpayers, which are paid in the form of a tax refund. As a student, you probably qualify, so check out what’s offered in your province. You may be able to get a tax refund even if you never paid any tax!
If you worked last summer and tax deductions were made from your paycheque, you can probably recover most of the tax, and some of the CPP premiums, when you file your return. If your net income is low enough, you may even be able to save your parents some taxes. To maximize the savings, take advantage of as many deductions as you can, but do not waste any that are available to you. The tuition fees, the education amount and the textbook tax credit that you do not need this year, can be transferred. If you prefer, they can also be carried forward through your tax return, so that you can use them in a future year when your income is higher.
Scholarships, Grants and Student Loans
Not all of your student income is taxable. Since the 2008 tax year, all income from scholarships, fellowships, bursaries and achievement prizes is tax exempt if you are enrolled in a program that qualifies for the education amount in 2007, 2008, or 2009.
Student loans, of course, are completely non-taxable. You can even claim a tax credit on the interest when you begin paying back the loan.
Research grants are taxable, but you may deduct any expenses you incurred to conduct research (e.g. travelling expenses). Wages earned as a teaching assistant, however, are fully taxable.
Deducting Your Moving Expenses
If you relocated during the course of the year, either to get a summer job or to take up attendance at your college or university, it’s possible that you can deduct your moving expenses.
These expenses are deductible if your residence is at least 40 kilometres closer to your new workplace or school than your old residence was. However, they can only be deducted against either employment income at your new location or, when you are moving to go to school, against award income such as fellowships, bursaries, scholarships and research grants.
Moving expenses include transportation costs such as your plane ticket. If you used your car, you can claim gas expenses and the cost of any meals and lodging en route. Also deductible is the cost of up to 15 days of temporary accommodation near your new or old residence. Receipts need not be filed with your return, but should be kept in case the Canada Revenue Agency (CRA) asks to see them later.
Claiming Your Tuition Fees
Tuition fees over $100 can be claimed as a tax credit. You can claim tuition fees for post-secondary courses at a college or university or, if you are 16 and over, for courses that you take at other approved institutions to improve your occupational skills. You need an official income tax receipt to claim your tuition fees or a T2202A, but the receipt does not have to be attached to your income tax return if you electronically file. Just keep it on hand in case the CRA asks to see it.
Eligible tuition fees include all mandatory fees charged by post-secondary institutions for educational purposes. However, these do not include fees levied by student bodies. For example, you cannot claim the following:
On top of claiming your tuition fees, you may also claim an education amount of $400 per month for every whole or part month in 2009 during which you were enrolled full-time in college or university. The $400 per month amount is also available to full-time post-secondary students enrolled in distance education programs or correspondence courses. If you are enrolled in a qualifying program but can only attend part-time because of a mental or physical impairment, you can still claim the $400 education amount.
If you are enrolled part-time in college or university, you may be entitled to a special education amount of $120 per month. In order to qualify for this amount, the eligible program must last at least three consecutive weeks and involve a minimum of 12 hours of courses each month.
The provinces also offer tuition fee and education tax credits. However, depending on what province you live in, they may not correspond exactly to the federal amounts.
Textbook Tax Credit
Post-secondary students will benefit from a non-refundable tax credit for textbooks. The amount on which the credit is based will be calculated as:
Tax Credit for Transit Passes
Transit includes travel by local bus, streetcar, subway, commuter train, commuter bus and local ferry. You can claim the cost of monthly transit passes or passes of longer duration.
You can also claim the cost of shorter duration transit passes if each pass allowed you unlimited travel for at least 5 consecutive days and you purchased enough of these passes to cover 20 days in any 28-day period.
The cost of electronic payment cards can be claimed when they are used to make at least 32 one-way trips during a period not exceeding 31 days.
The credit may be claimed by either the taxpayer or the taxpayer’s spouse or common-law partner for transit costs incurred by themselves and their dependent children under the age of 19.
Make sure you keep your passes and receipts so that you can substantiate your claim.
Unused Credits
Tuition fees and education amounts that are not needed to reduce your tax payable to zero need not be wasted. If you are single, you can transfer the unused portion to a parent or grandparent. If you are married or living in a common-law relationship, you may transfer it to your spouse or common-law partner. The maximum amount that can be transferred is $5,000 per year. There may also be limitations if you are transferring unused provincial amounts to a resident of another province.
Alternatively, if you cannot fully utilize your tuition fee and education amount, you have the option of carrying forward the unused portion and applying it against income in future years.
Financing Your Education
Putting yourself through post-secondary school can certainly cost a small fortune. It’s for this reason that measures have been introduced to help students finance their education. You can make tax-free withdrawals from your RRSP to pay for your full-time schooling, or for that of your spouse or common-law partner.
The amount you are eligible to withdraw may not exceed $10,000 in any one year, or $20,000 over a period of four years. Moreover, it will have to be repaid to your RRSP over a period of 10 years. The first repayment must be made within the first 60 days after the fifth year following the year of withdrawal.
If you (or your spouse or common-law partner) decide not to proceed with the education program, the full amount withdrawn must be repaid in that year, or you will be required to include the outstanding amount in your income.
By TaxServices@AccXpert.com
As a student, even if you have little to no income in the year, filing a tax return has its advantages — it’s the only way to receive all the benefits that are available to you.
If you are 19 or over, you are eligible for the annual GST/HST credit. To obtain this money, which is paid in quarterly installments, you have to apply for it by filing a tax return and completing the GST/HST application section of your return. If you are turning 19 before April 1, 2010, make sure you apply for the credit on your 2008 tax return.
Some provinces provide tax credits for low-income taxpayers, which are paid in the form of a tax refund. As a student, you probably qualify, so check out what’s offered in your province. You may be able to get a tax refund even if you never paid any tax!
If you worked last summer and tax deductions were made from your paycheque, you can probably recover most of the tax, and some of the CPP premiums, when you file your return. If your net income is low enough, you may even be able to save your parents some taxes. To maximize the savings, take advantage of as many deductions as you can, but do not waste any that are available to you. The tuition fees, the education amount and the textbook tax credit that you do not need this year, can be transferred. If you prefer, they can also be carried forward through your tax return, so that you can use them in a future year when your income is higher.
Scholarships, Grants and Student Loans
Not all of your student income is taxable. Since the 2008 tax year, all income from scholarships, fellowships, bursaries and achievement prizes is tax exempt if you are enrolled in a program that qualifies for the education amount in 2007, 2008, or 2009.
Student loans, of course, are completely non-taxable. You can even claim a tax credit on the interest when you begin paying back the loan.
Research grants are taxable, but you may deduct any expenses you incurred to conduct research (e.g. travelling expenses). Wages earned as a teaching assistant, however, are fully taxable.
Deducting Your Moving Expenses
If you relocated during the course of the year, either to get a summer job or to take up attendance at your college or university, it’s possible that you can deduct your moving expenses.
These expenses are deductible if your residence is at least 40 kilometres closer to your new workplace or school than your old residence was. However, they can only be deducted against either employment income at your new location or, when you are moving to go to school, against award income such as fellowships, bursaries, scholarships and research grants.
Moving expenses include transportation costs such as your plane ticket. If you used your car, you can claim gas expenses and the cost of any meals and lodging en route. Also deductible is the cost of up to 15 days of temporary accommodation near your new or old residence. Receipts need not be filed with your return, but should be kept in case the Canada Revenue Agency (CRA) asks to see them later.
Claiming Your Tuition Fees
Tuition fees over $100 can be claimed as a tax credit. You can claim tuition fees for post-secondary courses at a college or university or, if you are 16 and over, for courses that you take at other approved institutions to improve your occupational skills. You need an official income tax receipt to claim your tuition fees or a T2202A, but the receipt does not have to be attached to your income tax return if you electronically file. Just keep it on hand in case the CRA asks to see it.
Eligible tuition fees include all mandatory fees charged by post-secondary institutions for educational purposes. However, these do not include fees levied by student bodies. For example, you cannot claim the following:
- Students’ association fees
- Medical care
- Meals and lodging
- Transportation and parking
On top of claiming your tuition fees, you may also claim an education amount of $400 per month for every whole or part month in 2009 during which you were enrolled full-time in college or university. The $400 per month amount is also available to full-time post-secondary students enrolled in distance education programs or correspondence courses. If you are enrolled in a qualifying program but can only attend part-time because of a mental or physical impairment, you can still claim the $400 education amount.
If you are enrolled part-time in college or university, you may be entitled to a special education amount of $120 per month. In order to qualify for this amount, the eligible program must last at least three consecutive weeks and involve a minimum of 12 hours of courses each month.
The provinces also offer tuition fee and education tax credits. However, depending on what province you live in, they may not correspond exactly to the federal amounts.
Textbook Tax Credit
Post-secondary students will benefit from a non-refundable tax credit for textbooks. The amount on which the credit is based will be calculated as:
- $65 for each month the student qualifies for the full-time education amount; and
- $20 for each month the student qualifies for the part-time education amount.
Tax Credit for Transit Passes
Transit includes travel by local bus, streetcar, subway, commuter train, commuter bus and local ferry. You can claim the cost of monthly transit passes or passes of longer duration.
You can also claim the cost of shorter duration transit passes if each pass allowed you unlimited travel for at least 5 consecutive days and you purchased enough of these passes to cover 20 days in any 28-day period.
The cost of electronic payment cards can be claimed when they are used to make at least 32 one-way trips during a period not exceeding 31 days.
The credit may be claimed by either the taxpayer or the taxpayer’s spouse or common-law partner for transit costs incurred by themselves and their dependent children under the age of 19.
Make sure you keep your passes and receipts so that you can substantiate your claim.
Unused Credits
Tuition fees and education amounts that are not needed to reduce your tax payable to zero need not be wasted. If you are single, you can transfer the unused portion to a parent or grandparent. If you are married or living in a common-law relationship, you may transfer it to your spouse or common-law partner. The maximum amount that can be transferred is $5,000 per year. There may also be limitations if you are transferring unused provincial amounts to a resident of another province.
Alternatively, if you cannot fully utilize your tuition fee and education amount, you have the option of carrying forward the unused portion and applying it against income in future years.
Financing Your Education
Putting yourself through post-secondary school can certainly cost a small fortune. It’s for this reason that measures have been introduced to help students finance their education. You can make tax-free withdrawals from your RRSP to pay for your full-time schooling, or for that of your spouse or common-law partner.
The amount you are eligible to withdraw may not exceed $10,000 in any one year, or $20,000 over a period of four years. Moreover, it will have to be repaid to your RRSP over a period of 10 years. The first repayment must be made within the first 60 days after the fifth year following the year of withdrawal.
If you (or your spouse or common-law partner) decide not to proceed with the education program, the full amount withdrawn must be repaid in that year, or you will be required to include the outstanding amount in your income.
