School is now back in session and what better time for post-secondary students to start thinking about taxes. Sure, tax season may be eight months away, but by taking some time early in the school year to review some of the tax breaks available, students can get their hands on some of the $11-billion of financial assistance the government estimates it doled out to students in 2012.
There are three basic credits that most post-secondary students should automatically qualify for: the tuition credit, the education credit and the textbook credit.
The tuition credit is available for tuition fees paid to a university, college, or other post-secondary educational institution in Canada. Tuition fees paid for courses certified by Employment and Social Development Canada to develop or improve skills in an occupation also qualify for the tuition tax credit. If the school is outside of Canada, the tuition may also be eligible for the credit provided the attendance is full-time at a university in a course leading to a degree.
Students can also claim an education amount of $400 for each whole or part month in the year in which they are enrolled full-time in a qualifying educational program. The education amount is reduced to $120 per month for part-time enrollment.
Thirdly, students can claim a textbook amount of $65 for each month in which they qualified for the $400 full-time education amount above or $20 for each part-time month.
All three of these credits are non-refundable, meaning they cannot be used to generate a tax refund but can be used to reduce any taxes payable, perhaps on part-time or summer employment income. The credits are worth 15% at the federal level and the provinces and territories also provide credits at various rates.
If a student doesn’t have enough income in a particular year to use all these credits, she can transfer up to $5,000 to a spouse or partner, a parent or grandparent, or choose to carry forward either the entire amount or what’s remaining after the amount transferred to be used in a future tax year.
Another potential tax benefit that can help cash-strapped students is the goods and services tax/harmonized sales tax (GST/HST) credit. This tax-free quarterly payment is available to low income Canadians who are at least 19, making most students eligible. To get the credit, however, you must file a tax return.
Students who move at least 40 kilometres to attend a post-secondary program on a full-time basis can deduct moving expenses against any income earned while at school, perhaps from a part-time job. Similarly, if the student moved at least 40 kilometers from school during the summer months to earn employment income, those moving costs can also be deducted against any summer earnings.
Finally, students who take public transit should hang on to those passes in order to claim the federal public transit tax credit on their tax returns.