Hey, students, if you ever thought about becoming an entrepreneur and running your own business, here’s a good introduction to some of your tasks.
In the last week, we’ve been guiding students and parents through the quagmire of education and taxes with:
Today, we’ll look at your income and other deductions.
As a student, your tax return can become a little more complicated than just claiming your income.
You might have a variety of income sources and you more than likely have a number of ways to offset that income with tax credits and deductions.
Do I have to claim my scholarship?
Claiming employment income is an obvious one. A lot of students don’t know that other sources of income must be reported on their income tax returns.
The good news is, your scholarship, fellowship or bursary are tax exempt if you are enrolled full time and can claim the full-time education amount. If you can claim the part-time education amount, the scholarship exemption covers tuition fees and costs incurrent for program-related materials. The scholarship exemption chart will help you calculate the amount you need to claim.
If you are not eligible for either the full-time or part-time education amount, you must report the part of the award that is more than $500 on Line 130 of your T-1 tax return.
You must also report the following types of income:
- Net research grants
- Interest and other investment income
- Other types of income, such as government grants, training allowances and payments from an RESP or TFSA
While your various sources of income can increase the amount of tax you have to pay, students have avenues to offset that amount with deductions.
What tax credits can students claim?
In addition to claiming your tuition, education amounts and books, the federal government has a number of tax credits for which you may eligible, along with some expense-related deductions.
The tax credits are non-refundable, meaning you can only use them to reduce your tax payable to zero. They won’t count toward a refund.
The most common ones to look into are:
Canada employment amount
If you were an employee in the tax year, you can claim an employment amount in field 363 of your T-1. You can claim the lesser of $1,095 and the total of the income you reported on lines 101 and 104 of your return.
Public transit amount
You can claim the cost of transit passes for use by you, your spouse or common-law partner, or your children. We covered transit passes in March. Their cost can be a great help in reducing your taxes owing.
Interest paid on student loans
If your loan was from Canada Student Loans, Canada Student Financial Assistance or your provincial or territorial programs for post-secondary education, you can claim the interest paid on that loan in the current tax year and/or the previous five years. You cannot transfer this amount to another person. You can, however, carry the interest forward for five years to reduce taxes owing if you don’t need it for the current year.
These credits are calculated by multiplying the total dollar amount by the lowest personal tax rate percentage, which is currently 15 per cent.
What expenses are eligible?
This is where it really starts to feel like running a business, because you have to keep a good record of your expenses, including detailed receipts.
If you don’t keep your receipts, you can’t claim these expenses.
The top 2 expense-related deductions for students are moving and child care.
If the tax slip or certificate (typically the T-2202A) you received from your educational amount has an amount in Box C, you qualify to claim moving expenses our blog post on moving expenses to learn more about which costs are eligible, including meals and accommodation during your trip.
If your moving expenses exceed the taxable portion of your scholarships, fellowships, bursaries and research grants that you reported, you can carry forward the unused portion and use it to offset income in the following years.
If you or your spouse or common-law partner had to pay someone to look after your child while you went to school, your expenses are deductible.
This applies only to parents with children younger than 16 or who have a mental or physical impairment.
Can you help?
We’re here to assist you with your taxes and planning. We specialize in personal taxes and small-business accounting and financial services. Contact one of our tax specialists and we can help you optimize the tax benefits and credits available to self-employed individuals and small businesses.
Fill out our contact form or give us a call at 403-226-8297.
The Canada Revenue Agency has an active Twitter account. If you’re interested in following the account, you can the CRA at@CanRevAgency.