Student Filing 101: Understanding Student Tax Deductions
No matter the degree or diploma, as a post-secondary student, you and your family can benefit from student-based tax breaks available to Canadian taxpayers.
You can use a combination of these deductions and credits to save money toward your higher education costs.Tuition Tax Credit
Tuition paid for post-secondary education in Canada may qualify for a tax credit. Tuition paid outside of Canada also may be eligible, provided that you attend a university full time and enroll in a course of study leading to a degree.
If you're a low-income student, you may not need to use the entire tax credit in a particular year if you don't owe taxes. Instead, transfer up to $5,000 in education credits to a spouse or partner, a parent or a grandparent to help reduce their taxes.
Doug Cumpson, a tax specialist and partner at GB Taxes & Accounting in Dundas, Ontario, says that it's important for you to give consent before transferring the credits.
“Since the tax credit belongs to the student, it is incumbent to get the student’s agreement to transfer (it) to a third party by signing the back of the tuition slip,” he says; signing the tuition slip authorizes the transfer.
“Failing to obtain the consent will negate the transfer of the tuition credit,” Cumpson adds. Instead of transferring the credit, you may prefer to carry it forward to use in future years. “Sometimes these tax credits are large enough for a student to rescind their personal income taxes,” says Cumpson.
“In other words, (you could) obtain a huge personal tax refund after filing (your) first income taxes” when employed.Education and Textbook Tax Credits
You may claim an education amount of $400 for each whole or partial month in the year you attended a qualifying educational program full time; part-time students may claim $120 per month.
This non-refundable tax credit can't generate a tax refund, but like the tuition and textbook credits, all or part of it may reduce taxes owed or be carried forward to use in a future tax year. Alternatively, if you don't owe taxes, the credit may be transferred to a spouse, common law partner or even a parent or grandparent.
Students who qualify for the education credit also may claim a textbook tax credit.
A $65 textbook credit is available for each month that a full-time student qualifies for the $400 education credit. Part-time students who qualify for the $120 monthly education credit may claim $20 for each month of part-time study.Student Loan Interest Write-Off
You may carry forward interest from the last five years on loans under the Canada Student Loans Act, the Canada Student Financial Assistance Act, or similar provincial or territorial government laws. However, this amount is non-transferable, and there are several restrictions.
The amount is only eligible if it hasn't been claimed previously. And, it only includes student loan interest, not interest on other loans, including consolidation loans. This deduction also excludes interest paid as a result of a judgement against you for failure to pay back your student loan.Moving Expense Deduction
If you move more than 40 kilometres to attend a post-secondary institution full time, you may qualify for the moving expense tax deduction.
Look at the tax slip from the educational institution. If Box C -- full-time enrollment -- includes an amount, you are considered eligible.
However, there's a catch. These expenses are only deducted from the taxable part of scholarships, fellowships, bursaries, certain prizes and research grants.
You may claim multiple moving expenses in one tax year, including the eligible expenses incurred at the beginning of each academic period and those incurred when returning to school after summer break.Child Care Deduction
Students, who are also parents, may qualify to deduct child care expenses. Those who attended school and pay for care for a child younger than age 16 -- or a child who is physically or mentally impaired -- may qualify for the child care expenses deduction.
Married or common-law students may transfer this deduction. Usually, the lower income spouse claims child care expenses.
But, the higher net income spouse may claim the child care expenses if his spouse or common-law partner attended an educational program, lowering the family's overall income tax burden.Mass Transit Breaks
Students or their spouses may claim eligible public transit costs if they haven't already been claimed by another person in the family, or if they haven't been reimbursed for some or all of the cost.
This includes transit costs for the student and her spouse and children under 19 years old. Eligible transit passes may include unlimited weekly passes, monthly or annual unlimited cross Canada or local passes and electronic payment cards.