You might prefer to write an extra exam than wade through your student tax return.
However, even if you have a low income, it’s still worth filing.
You may be eligible for refunds like the GST/HST credit and other education credits. Filing also allows you to build Registered Retirement Savings Plan (RRSP) contribution room, which can benefit you in the future even if you can’t afford to contribute now.
Here are some tips to help you with your student tax return:
1. Use your unused tax credits strategically
As a student, your income is usually low, which means you may not need to use all your tax credits to bring your taxable income down to zero. Fortunately, some tax credits – like the tuition tax credit – can be carried forward or transferred to a spouse or partner, parent or grandparent.
Carry it forward
You may be able to carry forward some of your unused tax credits and use them when your income is higher and they’ll be more valuable to you. For example, if you’re underemployed during the first few years after graduating, it may be worth carrying over credits to a year when you’re earning more.
Transfer to your partner or parents
You may be able to transfer some tax credits to a spouse or partner, parent or grandparent, which they can then use to bring down their taxable income. The one caveat: if you are transferring credits, you must do it for the year it was incurred – you cannot carry it over to a future year and then transfer it.
2. Maximize your deductions
Canadian post-secondary students can benefit from a number of student-based tax breaks.
The one good thing about high tuition is that you can claim the full amount as a tax credit, as long as it is from a certified post-secondary education institution. This can apply to Canadian schools as well as those abroad. You can either carry forward unused amounts to future years (no limit on the carry-forward period), or you can transfer them to your spouse or partner, parent or grandparent. Although the federal education and textbook tax credits were eliminated in 2017, you can still carry forward unused education and textbook credit amounts from years prior to 2017
Interest paid on your government student loans
You can claim the interest you pay on your government student loans. This may seem trivial when you are in school, but you’ll love the tax break once you’re earning more money. Fortunately, you can carry the interest credit forward and apply it for up to five years after it was paid. The amount is non-transferable.
Fortunately, students will likely be paying less student loan interest in the future:
- The 2019 BC budget proposed eliminating interest charges on the provincial portion of post-secondary student loans.
- The 2019 federal budget proposed lowering the floating interest rate, used by the vast majority of student borrowers, to prime (down from prime plus 2.5%). New graduates would also get an interest-free six-month grace period after leaving school.
If you’re moving more than 40 kilometres to attend a post-secondary institution full time, you can likely claim moving expenses like transportation and storage costs, travel expenses and temporary living expenses. You can also claim multiple moving expenses in one tax year: at the beginning of each term and when returning to school after summer break.
Child care expenses
If you are a student with kids, you or your spouse (or common-law partner) may claim child care expenses if you paid for someone to look after your kids so one of you could earn income, go to school or conduct research. The child must have been under 16 or had a mental or physical impairment at some time during the year in order to claim these expenses.
If you have out-of-pocket expenses for prescriptions, dental work and other qualifying medical expenses, you can claim these on your income tax. Medical expenses can be claimed if they were paid within any 12-month period ending in the current tax year, and not claimed in the prior tax year. If you have coverage for part of these expenses through a parent or school health, you can only claim the portion that you have not been reimbursed for.
As a cash-strapped student, your charitable donations may be limited. However, saving your donation receipts can pay off down the road. You can save them for up to five years and claim them when you’re earning more income (the tax credit also increases on amounts over $200).
3. Use free software to prepare your tax return
Most student tax returns are relatively uncomplicated, so these free programs can make filing quick and easy:
For a full list of free tax software, check out the Canada Revenue Agency website.
4. Good advice can be free
If you want some expert advice without the price, you may be able to get help at a free tax clinic. You need to have a modest income and a simple tax situation to be eligible. You can search for a clinic by city and language.
Most colleges and universities also offer free tax clinics for students. They’re often offered through student/financial services or student government and staffed by volunteer business or accounting students looking to get some hands-on experience.