Until the end of April, Jamie Golombek will focus on tax filing tips for specific groups. This week, tax tips for students. Next week, tips for seniors.
With final exams just weeks away, it's unlikely that filing an income tax return is at the top of most students' minds. But students may find themselves with some extra cash this spring if they take the time to complete a return.
While there is generally no obligation to file a tax return if no taxes are owed, there are a few reasons why students should consider filing.
First, if they're at least 19, students should file a return to establish their right to collect the GST/HST credit, which is a tax-free quarterly payment meant to assist individuals with low incomes to offset all or part of the GST/HST they pay. To receive the GST/HST credit, Canadians must apply for it each year, even if they received it last year. And to apply, they must file a tax return, even if they have no income to report. The application for the GST/HST credit can be found on Page 1 of the return. To estimate how much the credit may be worth to them, filers can go to the Canada Revenue Agency's website and check out the Child and Family Benefits Online Calculator.
Another good reason to file a return is to get a refund of any tax withheld at source. If students had a part-time or summer job, chances are good their employer automatically withheld some income tax from their pay. Since most students are in a non-taxable position owing to the myriad credits available to students, filing a return to get back the amounts withheld at source may well be worth the effort.
As well, filing a return to report part-time or summer earnings will generate RRSP contribution room for use in future years. The RRSP contribution limit is based on 18% of earned income from the previous year. Since there is no limit to how much unused RRSP contribution room can be carried forward, filing a return now to report earned income will allow students to make more of an RRSP contribution later in life, when they're in a higher tax bracket and the corresponding deduction is worth more.
Once students have made the decision to file, they should be sure to claim all available credits to reduce any tax owing to zero. They can start with the basic personal amount, available to every Canadian, which is $10,320 in 2009.
In addition, full-time students should be able to claim the education amount of $400 for each eligible month of attendance ($120 per month for part-time students). Those who can claim the education amount can also likely claim the relatively new textbook amount, equal to $65 for each eligible month ($20 per month for part-timers) in school.
Both tuition fees and interest on student loans may also be eligible for a credit.
And finally, students who take public transit to school should make sure to claim the transit credit.