Income tax filing is something many students prefer not to do themselves. Many feel they don’t earn enough, so they don’t need to file. However, there are many credits, refunds, and benefits available to students which can equate to free money.
Here’s what students need to know:
1. Income
People who earn less than $30,000 a year, which is the case for most students, are taxed at 15 per cent of their income. As well, every Canadian receives a tax break of $11,138. This means, someone earning $20,000 will only pay taxes on $8,862.
Students may not have earnings, but scholarships, investment incomes and grants are all considered revenue.
2. Student loan interest credit
Students can claim an amount for the interest paid on a loan for their education. Only loans under Canada Student Financial Assistance Act, Canada Student Loans Act or similar provincial law, such as Ontario Student Assistance Program (OSAP), can be claimed for credit.
3. Non-refundable tax credits
A non-refundable tax credit decreases the total amount of taxes owed to the government. There are many credits available to students that generally give a return of 15 percent of a total amount spent in that category. For example, a student spending $1,200 on public transit could get a credit of $180. Other non-refundable tax credits include tuition ($400 per month for full-time students; $120 for part-time) and textbooks ($65 per month for full-time students; $20 for part-time).
Non-refundable tax credits earned from claims can be saved for an unlimited time. Most students will use their benefits once they’re earning more money to lighten the taxes they pay on a higher income. Students can also choose to transfer up to $5,000 in credits to a parent, grandparent or spouse (which can only be done once personal credit, Canadian Pension Plan and Employment Insurance has been deducted).
4. Moving expense deduction
Full-time students can claim moving costs if they have moved at least 40 km within Canada for work, school or an internship. Costs include canceling utilities (hydro, cable, water), lease voiding fees, and storage and travel costs (meals and accommodations).
5. GST/HST credit
This credit is designed to help households with a lower income. Anyone who’s 19 or older can apply for this credit. A small amount is paid out four times a year, through direct deposit, to help alleviate the added cost of the goods and service tax.
6. RRSPs to fund education
Registered Retirement Savings Plans (RRSP) allows students to save money on their current income taxes while saving money for retirement. RRSPs are tax exempt until the holder chooses to receive payments from the plan.
Some students may want to pay loans faster and will withdraw money tax free from their RRSP under the Lifelong Learning Plan. They must repay the amounts over a ten-year period, but it’s interest-free.
For more information on taxes, students can pick up general tax guides and income tax forms, for free, at the post office.
This story was first published in The Ryersonian, a weekly newspaper produced by the Ryerson School of Journalism, on February 26, 2014.
Feature writer. Popular culture and current events. Journalism class of 2014.