Canadian university students qualify for many unique tax credits when they file their annual income tax return. Majority of students avoid filing a tax return. This is because they believe that they do not need to file as they have little or no income.
However, students can and should file their tax returns just like any other taxpayer. The following has highlighted a few points that Canadian student taxpayers should keep in mind before filing their taxes.
Some Tax Credits Do Not Expire
Full-time students may not be working at all or might be working on a part-time basis. In such cases, they may not need to claim the tax credits as you may owe little to no taxes. It may seem like all those tuition tax credits are going to waste. Students can carry-forward unused credit amounts and use them in future tax years during full time work.
Student Tax Credits Other than Tuition Credit
Students can claim the amount paid in tuition fees each year in addition to tax credits for other education costs. Most of the literature available states that students can claim what they pay for textbooks and other costs. This results in students retaining their receipts, which is a bit misleading. In reality there is a tax credit that students can claim based on the number of months of full/part time education during the year. The credit amount is reflective of the actual cost of textbooks and other education-associated expenses.
For the most part, the allowable deductions are driven by form T2202A which schools should provide to their students every year. If you are a student at a U.S. school or foreign university you can still obtain credit for your school related costs by obtaining a completed and signed TL11A form. You will most likely have to provide the form TL11A to your school’s registrar’s office yourself. The printable version is available on the CRA website.
Credit Claim Threshold Limit
The education credit is based on the number of months. It is a maximum of $400 per month for a full-time student and $120 per month for a part-time student. In order to arrive at the total credit amount claimable for tax purpose, students need to add the textbook amount to this education tax credit amount.
Keep in mind that the textbook amount maxes out at $20 per month for a part time student and $65 per month for a full time student. Students should add the actual tuition paid for the year to these credits to arrive at the total credits claimable on the tax return.
Parents Can Claim the Education Credits But Not Fully
It may be that you will want your parents to claim your education expenses on their tax return. This is often beneficial as parents are able to use the tax credit immediately or save the refund to use for tuition next year. You should be aware that your parents can only claim a portion of the expenses each year so you may have some deductions left over. The maximum amount that a student can transfer to a parent/guardian is $5,000. The transfer can only occur in the year the individual reports the tuition fees on their tax return.
Organize and Maintain Slips & Receipts
All deduction or credit claimed for tax purposes should have valid documents in support of the claims made. A good taxpayer always maintains all his/her bills, receipts, and invoices as they will be handy while claiming tax deductions and credits . As a student taxpayer you should keep any employment slips, medical receipts, public transit passes and anything else you think is relevant. Providing all of these receipts to your accountant ensures that they can file the most accurate information possible and hopefully get you some tax refund.
File a Return Even If There is No Reportable Income or Refund Expected
Even if a student does not receive any income and is not expecting a refund he/she should still file a tax return. Filing a return helps preserve the education credits for future tax years. Filing a return with little to no income can help access the GST/HST benefit. Students also need to file a return if they want to transfer their tuition tax credits to their parents.
AG Tax LLP Can Help
If you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. We are a team of highly experienced tax professionals with extensive knowledge of U.S. and Canadian cross-border compliance as well as U.S. and Canadian tax laws.
Furthermore, as a full service accounting firm, AG Tax is dedicated to assist you with even your most complex tax needs.
We can assist with:
- Canadian Personal and Corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
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