There’s always lots to learn when studying at college or university, but one of the most valuable lessons many students get is how to manage their finances and make the most of every dollar.
Part of that journey is filing an income tax return for the first time and learning to take advantage of any available tax benefits offered to full-time and part-time post-secondary students.
Students often face steep expenses for tuition costs, rent and food, and possibly transportation, all while typically earning lower incomes, or nothing at all during the academic year.
If you’re a student whose personal finances could benefit from some timely tax breaks, or you know someone who is, here’s what to know this filing season.
Tuition tax credit
If you’re over the age of 16 and spent more than $100 in the past year on tuition costs at a Canadian post-secondary institution, you may be eligible to claim that cost as a tuition tax credit. In return, you’ll get a credit for a percentage of your total eligible costs; the rate is equal to the lowest individual income tax rate, which is currently 15 per cent. To benefit from this credit, you’ll need the T2202 Tuition and Enrolment Certificate before you file your return.
The tuition tax credit is non-refundable, meaning you won’t get a refund cheque if you don’t have a balance owing. However, one nice thing about this tax credit is that it provides options to share or defer the tax savings. Students can choose to either transfer up to $5,000 in eligible spending each year to a spouse, parent, or grandparent to claim, or carry the credit forward to a time when they’re earning income and paying tax.
Claim interest on student loan payments
If you paid interest on a federal student loan obtained through the Canada Student Loans Act (or a provincial or territorial equivalent) and you’re looking to reduce the amount you owe in taxes, you can reduce your bill by claiming an amount for those interest payments.
If you don’t have a balance owing on your tax return this year but you did pay student loan interest in any of the preceding five years, you can claim any accumulated interest payments that you haven’t already claimed.
This tax credit can only be claimed by the individual who made the loan interest payments and cannot be transferred.
Claim expenses for moving
If you moved at least 40 kilometres within Canada to attend full-time courses at a post-secondary institution in the previous year, you may be eligible to deduct moving expenses including costs for travel, transportation and storage, plus maintaining your old home or paying penalties for breaking a lease.
The condition is that you also had to earn income from that move through taxable scholarships, research grants, bursaries, or fellowships, because the credit is applied to the income earned from these sources.
As long as there’s qualifying income, students can claim expenses for the costs they incur when moving to take part in co-op work terms.
CTC – Canada training credit
Not everyone heads straight from high school graduation into post-secondary education. If you’re a student older than 25 and younger than 66, you may be eligible to claim the Canada training credit (CTC).
Every eligible year you file an income tax return, your CTC limit increases by $250, up to a lifetime maximum of $5,000. Students can claim the lesser of two amounts: their current CTC limit, or 50 per cent of eligible tuition and other fees paid in the relevant tax year. Fees paid to take occupational, trade or professional exams are eligible to be claimed.
The CTC is a refundable credit, meaning you’d get money back in the form of a tax refund if your credit exceeds your balance owing.
