Credits and Deductions 101
Tax Planning Checklist for Students
If you are a student, you may wish to take advantage of the tax credits and deductions available to you. Below is a useful quick reference for the most common federal tax credits, deductions and tax-assisted programs. Different rules may apply if you are studying in Canada as an international student, or if you are enrolled at a foreign educational institution.
Tuition amount - You may be eligible to claim a 15% non-refundable credit for tuition fees. Generally, fees qualify if the course was at the postsecondary level or for individuals 16 years of age or older at the end of the year, it develops or improves skills in an occupation and the educational institution has been certified by Employment and Social Development Canada. Eligible tuition fees include admission fees, charges for the use of library or laboratory facilities, exemption fees, and examination fees that are integral to the program. Other fees include application, confirmation, charges for a certificate, diploma or degree, mandatory computer service, and academic fees.
Transfer or carry forward of unused tuition and other amounts - You must first claim your tuition credit on your own tax return to reduce your taxes payable to zero for that particular year. If you have any unused credits available, you may choose to either transfer or carry forward the amounts. You can transfer the unused credits to your spouse or to your or your spouse’s parent or grandparent. The maximum amount you can transfer is $5,000, less the amount you used to reduce your own taxes payable. You can carry forward the unused credits to future years in which you have taxes payable.
Interest paid on student loans - You can claim a 15% non-refundable tax credit for interest paid on loans made under the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Apprentice Loans Act, or similar provincial or territorial laws for post-secondary education.
Scholarships, fellowships, bursaries and study grants - If you are a qualifying student in respect of your specific program, you may be able to receive annual scholarships, fellowships, bursaries, and certain awards tax-free. If you are not a qualifying student, the first $500 of the post-secondary awards you receive in a year is usually tax-free and the remainder is taxable.
Research grants - A research grant allows you to carry on research or any similar work for the purpose of discovering new facts or developing knowledge. If you receive a research grant, you only have to include in income the portion that exceeds your allowable expenses. Allowable expenses include expenses for travelling, including meals and lodging while you are travelling, fees paid to assistants, the cost of equipment and supplies, and laboratory fees and charges.
Moving expenses - If you moved to be at least 40 km closer to your new school or place of work, you may be able to deduct moving expenses. If you moved to be a full-time student in a post-secondary program at a university, college or other educational institution, you can deduct your moving expenses from certain eligible income. Eligible income is the part of your scholarships, fellowships, bursaries, and study grants that are taxable. If you moved to work, including summer employment, you can deduct your moving expenses from the employment income you earned at your new work location. If you moved as a co-operative student, you can deduct the moving expenses you incur at the beginning of each academic period when you move back after a summer break or a work semester, provided you meet the 40-km requirement each time.
Lifelong Learning Plan (LLP) - If you are a resident of Canada, you may be able to withdraw up to $10,000 per year, to an overall limit of $20,000 over a qualifying period, from your RRSP to finance full-time training or postsecondary education for yourself or your spouse. The amounts you withdraw under the LLP must be repaid over a maximum of 10 years.
Registered Education Savings Plan (RESP) amounts - Original contributions to an RESP can be withdrawn at any time and are not taxable if paid to the subscriber or to you, the beneficiary of an RESP. An Educational Assistance Payment (EAP) is a payment of the income and government grants that have accumulated in the RESP over time and can also be paid to you, as a beneficiary of an RESP. An EAP is taxable income.
The GST/HST credit - is a tax-free quarterly payment that aims to help you offset all or part of the GST/HST you pay, provided you have a low or modest income and are a resident of Canada. The Canada Revenue Agency automatically determines your eligibility for the GST/HST credit when you file your tax return.
Public transit amount - You may be able to claim a 15% nonrefundable tax credit for the cost of certain public transit passes that are for the use of public transit for the period January 1 to June 30, 2017 on your 2017 tax return. Monthly passes or passes of longer duration qualify for this credit. Keep your receipts and passes as proof of purchase to substantiate your claim for this tax credit. This tax credit has been eliminated after June 2017.
Canada employment amount - If you earn employment income, for example from a co-op position, you can claim this 15% nonrefundable tax credit. This credit is provided to recognize that you might have work-related expenses that you need to incur such as purchasing a home computer, uniform or supplies. You cannot claim this amount if you are self-employed.
Final thoughts - It may be to your advantage to file a tax return, even if you have no income for the year, in order to either transfer or carry forward certain credits or to receive the GST/HST credit. If you have any questions or require clarification of any of the points discussed in this article, be sure to contact your qualified tax advisor.
Susan Gottlieb is Vice President and Wealth Advisor with RBC Dominion Securities Inc. This article is for information purposes only. Please consult with a professional advisor before taking any action based on information in this article.
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