So you're a student. In the past, I'd imagine you've either prepared your tax return yourself, gone somewhere like H&R Block, or had your parents prepare your tax return. I'm not saying any of these methods are bad - however, you might be missing out on some beneficial tax deductions and credits you didn't know existed.
This blog will focus on these deductions and credits. Lucky for you, the income side of the equation is generally a lot simpler for students. First, you'll receive your slips (T4s, T4As, T5s, etc.) in the mail. Then, with tax preparation software, it's easy to input the numbers into the correct forms and boxes. Just to clarify, a deduction is something that lowers your net income for the year (ie. income minus expenses). The amount of tax you owe is calculated based on this income amount. A credit is something which reduces the tax you owe by a certain % of the credit. If you need more clarification, let me know in the comments!
This blog will focus on these deductions and credits. Lucky for you, the income side of the equation is generally a lot simpler for students. First, you'll receive your slips (T4s, T4As, T5s, etc.) in the mail. Then, with tax preparation software, it's easy to input the numbers into the correct forms and boxes. Just to clarify, a deduction is something that lowers your net income for the year (ie. income minus expenses). The amount of tax you owe is calculated based on this income amount. A credit is something which reduces the tax you owe by a certain % of the credit. If you need more clarification, let me know in the comments!
Tuition
Nowadays, you'll be able to find your tuition tax receipts online (for example through Quest at the University of Waterloo). These will typically be in the form of a T2202A. Remember, if you took a course at a different school than your own (such as an online course through Athabasca University), you should also have a T2202A slip from this school as well. The good thing about tuition is that there is no limit to the amount of tuition you can report each year, and the unused amounts are carried forward until you use them. Another benefit with tuition is the ability to transfer the tuition to a parent, grandparent, spouse or common-law partner. There are two catches - you must first use your tuition to reduce your taxes to 0, and the amount you can transfer is maxed at $5,000 a year federally, and different amounts for the provinces (Ontario is $6,503). See taxtips.ca's article on tuition transfers for some more info.
Without getting into the complexities of the calculation, generally to maximize the tax benefit the tuition should be transferred to the person with the highest net income (ex. if choosing between mom and dad). Some tax programs will automatically optimize this transfer for you - however you should make sure that whoever is preparing your taxes has considered the impact of deciding who to transfer the tuition to.
Keep your tuition slip handy. In my experience, this is one of the more common items that the Canada Revenue Agency (CRA) will ask to see while conducting one of their reviews. Have the second page of the slip filled out and signed - this is where you designate how much and who you will be transferring some/all of your tuition to. This guide from the CRA is a good reference on transferring tuition.
Without getting into the complexities of the calculation, generally to maximize the tax benefit the tuition should be transferred to the person with the highest net income (ex. if choosing between mom and dad). Some tax programs will automatically optimize this transfer for you - however you should make sure that whoever is preparing your taxes has considered the impact of deciding who to transfer the tuition to.
Keep your tuition slip handy. In my experience, this is one of the more common items that the Canada Revenue Agency (CRA) will ask to see while conducting one of their reviews. Have the second page of the slip filled out and signed - this is where you designate how much and who you will be transferring some/all of your tuition to. This guide from the CRA is a good reference on transferring tuition.
Rent/Property Taxes
Rent or property taxes you paid in Ontario during the year (regardless whether it be for going to school or working) can be reported on your tax return, for a benefit to be received later on in the year. There is an income threshold for who can benefit from this, however it is likely if you are in school that you will be below it.
Ontario has changed the way they pay these benefits - they now issue monthly payments (one lump-sum in July if your total benefit is less than $360) of the 'Ontario Trillium Benefit', which is a combination of the rent/property tax benefit as well as the Ontario sales tax benefit. If you first started to pay rent in 2012, you won't start receiving the monthly benefits until July 2013.
Utilities/internet/other incidental costs are only allowed to be claimed as rent if they are included in your rent cost. Unfortunately, if you lived in a student residence, you are not able to claim the fees you paid to the school - you can only receive $25.
Rent is another one of those items that the CRA loves to ask for receipts. Landlords should be used to providing these types of receipts to their tenants, and if they don't do so automatically, you should ask them for one. Technically, landlords are no longer required by law to issue a rent receipt if the request is greater than one year from the time you moved out of the property (they can still do so if they choose, but you could have a landlord that's difficult to deal with). If for some reason you file your taxes a bit late, and/or the CRA for whatever reason decides to review your previous return, you will be thankful you've avoided the potential hassle and have already obtained the receipt.
Ontario has changed the way they pay these benefits - they now issue monthly payments (one lump-sum in July if your total benefit is less than $360) of the 'Ontario Trillium Benefit', which is a combination of the rent/property tax benefit as well as the Ontario sales tax benefit. If you first started to pay rent in 2012, you won't start receiving the monthly benefits until July 2013.
Utilities/internet/other incidental costs are only allowed to be claimed as rent if they are included in your rent cost. Unfortunately, if you lived in a student residence, you are not able to claim the fees you paid to the school - you can only receive $25.
Rent is another one of those items that the CRA loves to ask for receipts. Landlords should be used to providing these types of receipts to their tenants, and if they don't do so automatically, you should ask them for one. Technically, landlords are no longer required by law to issue a rent receipt if the request is greater than one year from the time you moved out of the property (they can still do so if they choose, but you could have a landlord that's difficult to deal with). If for some reason you file your taxes a bit late, and/or the CRA for whatever reason decides to review your previous return, you will be thankful you've avoided the potential hassle and have already obtained the receipt.
Tip: If you subletted your property during the year, do NOT include the amounts you were reimbursed when claiming your rent! It is likely that your subletter will request a rent receipt from you, and you will be required to provide him/her one.
Moving Expenses
There are two typical scenarios where students would be able to claim moving expenses:
1. You move back home from school (either for co-op, or an off-term), and you work while you are at home.
2. You move from home to school, and you receive a taxable bursary/scholarship from your school (less likely, as most scholarships/bursaries are tax-free)
If either of the above scenarios apply, then:
- If your move made you more than 40km closer to your job/school, you are eligible to claim moving expenses
- In Ontario, you can deduct $0.55/km if you traveled by car (you can instead deduct your actual expenses, however this requires a lot more record keeping and is not usually worth the effort)
- You can also deduct costs such as storage, moving trucks, meals and accommodations (subject to restrictions)
- There are other costs which are deductible, such as lease cancellation fees, however most of these will likely not apply to students
1. You move back home from school (either for co-op, or an off-term), and you work while you are at home.
2. You move from home to school, and you receive a taxable bursary/scholarship from your school (less likely, as most scholarships/bursaries are tax-free)
If either of the above scenarios apply, then:
- If your move made you more than 40km closer to your job/school, you are eligible to claim moving expenses
- In Ontario, you can deduct $0.55/km if you traveled by car (you can instead deduct your actual expenses, however this requires a lot more record keeping and is not usually worth the effort)
- You can also deduct costs such as storage, moving trucks, meals and accommodations (subject to restrictions)
- There are other costs which are deductible, such as lease cancellation fees, however most of these will likely not apply to students
Tip: Although sometimes hard to find, the Canada Revenue Agency (CRA) offers an abundance of tax information online. They have an entire section dedicated to students, which can be accessed here. If you're every curious about a Canadian Tax matter, I encourage you to contact me. However for many items, Googling "Your question..... CRA" will most likely steer you in the right direction. Although the opinions of the CRA are not the law, they are the people who are assessing your return, and it's initially up to them to decide whether or not they will accept the claims you've made.
Transit Passes
Bus passes that are included in your student fees can be used to claim a credit on your tax return. You'll have to check with your individual school, but most likely they will issue some sort of tax receipt telling you how much you can claim. For example, at the University of Waterloo, Feds offers tax receipts here.
If you use transit to commute to and from work and you use a monthly pass (or use something like Presto in the GTA), you can probably claim an amount for your pass. The CRA's guide to the transit credit explains some other scenarios in which you can also claim the credit.
If you use transit to commute to and from work and you use a monthly pass (or use something like Presto in the GTA), you can probably claim an amount for your pass. The CRA's guide to the transit credit explains some other scenarios in which you can also claim the credit.
Professional Dues
Some students may belong to some professional bodies as 'student members' while still in school. Generally, these payments can generate some sort of benefit on your tax return.
If you worked during the year, and were required to pay a fee to an organization in order to be employed, then these fees would be deductible. The main requirement is that these dues are related to your employment.
In other cases, student membership fees may be recognized as tuition, and eligible for the tuition credit as discussed above. For example, the Institute of Chartered Accountants of Ontario (ICAO) annual student membership fee is an eligible tuition fee. Each organization should provide you with a tax receipt, and hopefully some guidance as to whether or not the payment qualifies as tuition.
If you worked during the year, and were required to pay a fee to an organization in order to be employed, then these fees would be deductible. The main requirement is that these dues are related to your employment.
In other cases, student membership fees may be recognized as tuition, and eligible for the tuition credit as discussed above. For example, the Institute of Chartered Accountants of Ontario (ICAO) annual student membership fee is an eligible tuition fee. Each organization should provide you with a tax receipt, and hopefully some guidance as to whether or not the payment qualifies as tuition.
Employment Expenses
While working during summer or while on co-op, you may be required to to pay some of your own expenses. This could include but is not limited to driving to clients, use of your personal cellphone, accommodation costs, the use of a home office, etc. Some of these expenses may be deductible on your personal tax return.
Your employer must give you a form called a T2200 at the end of each year which states which types of expenses you were responsible for, and any expenses which you were reimbursed for. You must have this form filled out and signed by your employer in order to claim any employment expenses.
A general rule of thumb is to save all of your receipts relating to your employment-related expenses. The rules for claiming vehicle and home office expenses are a bit more complicated, and I would advise you to contact me or another professional if you think you could be eligible to claim these amounts.
Your employer must give you a form called a T2200 at the end of each year which states which types of expenses you were responsible for, and any expenses which you were reimbursed for. You must have this form filled out and signed by your employer in order to claim any employment expenses.
A general rule of thumb is to save all of your receipts relating to your employment-related expenses. The rules for claiming vehicle and home office expenses are a bit more complicated, and I would advise you to contact me or another professional if you think you could be eligible to claim these amounts.
If you have any questions or ideas for future blogs, feel free to leave a comment below!
- Jacob
- Jacob