Income Tax

Income tax basics

 

♦ A tax return is a form in which you declare your income, relevant expenses, and personal circumstances related to taxes for the previous calendar year.

 

♦ The Canada Revenue Agency (CRA) collects taxes on behalf of the Canadian, provincial and territorial governments. The CRA is the final authority on tax rules and regulations.

 

♦ You must file a tax return under certain circumstances, most notably if you have to pay tax in that year. You can choose to file a tax return if you want to claim a refund, or claim/carry forward certain tax credits. A list of specific circumstances is available here.

 

◊ The Canada Revenue Agency provides information for international students on filing their taxes in Canada. For more information, visit the international centre at your post-secondary institution.

 

♦ Tax returns are due every year on April 30th.

 

◊ If you owe money and you miss this date, you may be charged a penalty.

 

◊ If you do not owe money and you miss this date, there is no penalty, you will just delay receiving any refunds.

 

♦ You can file your tax return as soon as you have all the necessary documents.

 

◊ Documents include T2202A slips (for tuition, education, and textbook amounts), T4 slips (for employment income), and T4A slips (for income from scholarships, fellowships, bursaries, and RESP payments). Increasingly, organizations have begun providing electronic tax slips that you can download through your student, employee, bank, or other applicable account. Therefore, you should not expect to receive all the documentation you need though the mail.

 

◊ Returns will start to be processed in mid-February. If you submit your taxes by then, you can expect a refund by mid-March.

How do I complete my tax return?

 

♦ You can hand over your documentation to a financial institution (such as H&R Block) and they will complete your tax return, for a fee.

 

♦ If your income is below a certain amount, you can visit a volunteer tax preparation clinic to get help completing your tax return. You must bring all your documentation. These clinics are offered between February and April every year. You can find a location in your region here.

 

♦ Your student union/association may offer tax filing services.

 

◊ The University of Manitoba Students’ Union has a tax office where you can use an online filing service and get help from trained staff. 

 

♦ International centres at post-secondary institutions may offer tax assistance for international students.

 

♦ There is also easy-to-use software that you can download and use to complete your tax return for free. The programs will lead you through a series of questions, allow you to input your tax slip information and do the calculations for you.

 

◊ Visit the Canada Revenue Agency website to get a list of certified software compatible for different platforms.

 

◊ There are multiple free software options for students (and others).

 

♦ When you have completed your tax return, you can file it electronically (instructions will be provided).

 

♦ If you want to review your personal information or your tax return, you can use the My Account online service.

 

♦ After you have submitted your tax return, you will receive a Notice of Assessment in the mail. Review this document to make sure everything is correct and keep it on file. You may need some of the information in this document to complete next year’s tax return, apply for student loans, or contribute to an RRSP.

                                                                                                                                                                    

♦ For more information, visit the Canada Revenue Agency website.

Why do taxes come off my income if I am refunded later?

 

♦ When you start a new job and are completing the paperwork, find out if income tax will be deducted from your pay cheque.

 

♦ You may want to fill out a TD1 Personal Tax Credits Return form declaring your personal tax credits and submit them to the payroll office. This way the appropriate amount of income tax will be deducted from your pay.

 

◊ Otherwise, income tax may be deducted and then refunded to you when you file your income tax.

 

♦ Possible advantage of having income tax deducted from your paycheque:

 

◊ It decreases your chances of owing money to the government at tax time.

 

◊ It can help you save money. If you cannot access it, then you will not be tempted to spend it.

What documents do I need to keep for income tax purposes?

 

♦ Keep bus passes and receipts, rent receipts, tax slips (T4s, T4As, T5s, T2202As), receipts for medical expenses, childcare and moving expense receipts (see the CRA website for more information about specific eligible expenses to know what documentation to keep).

 

♦ You should keep all receipts, tax slips and other documentation that you will claim on your taxes together in a file. This will make filing your taxes much easier.

 

◊ Some of your documentation may be electronic. You may want to print out necessary documentation as you receive it to make it easier to keep track of.

 

♦ The federal government suggests you keep your tax records for 6 years, in case you are audited.

What if I make a mistake on my tax return?

 

 ♦ If you make a mistake, you can make a correction after you receive your notice of assessment in the mail from the CRA. You can make changes to a tax return for up to 10 years.

 

♦ The CRA has information about how to make a correction online and by mail.

 

♦ To avoid making mistakes, review your tax return several times before you submit it and visit a tax clinic or tax office at your post-secondary institution for help.

 

◊ If you are not confident in your ability to complete your tax return on your own, you can have it done for you at a financial institution for a fee (e.g., H&R Block). However, it is still up to you to submit all the necessary documentation to ensure it is done correctly.

How do tax credits work?

 

♦ Every Canadian resident has a personal exemption amount (federally and provincially) on which they do not have to pay taxes.

 

◊ Federally, the basic personal amount is $11,138 in 2014.

 

◊  In Manitoba, the basic personal amount is $9,134 in 2014. See a table of amounts for all provinces/territories here.

 

 ◊ More information for non-residents in Canada filing an income tax return can be found here.

 

♦ If you have taxes that are payable beyond the personal exemption, tax credits can reduce the money you owe.

 

♦ Refundable tax credits can reduce the amount of taxes you owe below zero, giving you a refund in the year you claim the credit. 

 

♦ Non-refundable tax credits are used to decrease the total amount of taxes you owe. However, they cannot reduce your taxes below zero. 

 

◊ Therefore, if you have a low income, you may not benefit from them.

 

◊ Some tax credits can be carried forward to future years or transferred to another individual with a larger income who will have the taxes they owe reduced.

Tuition, education, and textbook tax credits

 

Tuition, education and textbook amounts are non-refundable tax credits available through the federal government and your provincial/territorial government.

 

◊ You will not receive a refund unless you owe taxes. You can carry forward the amount to reduce future taxes or transfer up to a certain amount to your spouse, parents or grandparents to reduce their taxes (learn more below).

 

♦ You will have to download your tax slip (T2202A) through your online student account. This form will specify the amounts you can claim. 

 

◊ If you are using a computer program, enter the values indicated on your T2202A tax slip when prompted and the calculations will be done for you.

 

Tuition amount: The total eligible amount spent on tuition, compulsory fees and examination fees (if it is required to obtain professional status, or certification or licence in a recognized trade) over $100.

 

◊ The tax credit rate determines the value of your tuition tax credit. The federal tax credit rate is 15% in 2014. $8,000 in eligible tuition fees would be multiplied by 15%, giving you a $1,200 tax credit federally (i.e., it would reduce your income tax owed by $1,200).

 

◊ Each region has its own tax credit rate for tuition. Tax credit rates by province and territory can be seen here.

 

◊ You cannot claim your tuition amounts if they were paid for or reimbursed by an employer (learn more).

 

Education amount: Federally, in 2014 you can claim $400 per month for full-time studies (or part-time studies if you can claim the disability amount or have a certified mental or physical impairment) and $120 per month for part-time studies. 

 

◊ Each province has its own education/textbook amounts (see table).

 

Textbook amount: You can only claim this if you qualify for the education amount. The textbook tax credit is $65 per month in 2014 for full-time studies and $20 per month for part-time studies.

 

◊ Each province has its own education/textbook amounts (see table).

How much will I save with student tax credits?

 

Tax credit savings can be substantial for students. However, many tax credits only benefit students after they have already paid for their education, possibly even after they have already paid for their entire program. It can be difficult to consider them when you are budgeting for your education, however the money you get back can help you pay your expenses following an academic year (or post-secondary program) and they can make paying back debt easier.

 

What you Don’t Know Can’t Help You: Lessons of Behavioural Economics for Tax-Based Student Aid is a recent report on the use of student tax credits in Canada.

 

♦ In 2012, about 2/3rds of tax credit funds were not used to reduce students’ taxes in the year they were earned. Instead they were claimed by parents, grandparents, spouses or by students who accumulated their credits in an earlier year.

 

♦ The eventual tax savings from tuition, education and textbook credits were calculated for a student paying $6,000 in tuition for a full-time program over 8 months in 2012

 

◊ The savings ranged from $1,843 in British Columbia to $2,596 in Alberta

 

◊ On average, University students can save from 31% to 43% of their tuition fees.

 

◊ Education & textbook amounts are based on months of study rather than tuition, therefore college students tend to save a larger portion of their fees (at least 60% in all provinces) because they tend to have lower tuition.

Transferring tax credits to my parents, grandparents, or spouse

 

♦ You can transfer unused tuition, education and textbook tax credits to your spouse, parents or grandparents in the year that you receive them, up to a maximum amount.

 

◊ Once you carry them forward to future years, they are no longer transferrable.

 

◊ Your own taxes must be reduced to zero before transferring unused amounts.

 

♦ You should discuss how the tax savings will be used ahead of time, which will depend on your individual circumstances.

 

◊ The individual you are transferring the credits to may choose to pass their savings onto you (therefore, this is a way to get an advance on your tax credit).

 

◊ They may want to keep the savings (e.g., to offset the financial support they have already provided or pay back money you owe).


GST/HST credit

 

♦ This is a refundable tax credit paid four times a year (in January, April, July and October) to residents of Canada with low or modest incomes to offset GST and HST.

 

♦ You must apply for the credit every year on your tax return.

 

♦ You can have the amount directly deposited into your bank account.

 

♦ Find out more here.  

Public transit tax credits

 

♦ A non-refundable federal tax credit is available which allows you to claim the cost of some transit passes that allow unlimited travel. This can reduce the amount of taxes you owe.

 

◊ You will not benefit if you do not owe any tax. 

 

◊ You cannot carry it forward to future years.

 

◊ If you are under 19, your parents can claim this amount. If you have a spouse or common-law partner, they can claim this amount.

 

♦ Find out more here.

Student loan interest tax credit

 

♦ You are eligible for a federal and provincial/territorial tax credit for interest paid on government student loans each year.

 

◊ Keep your payment documentation.

 

◊ Your government student aid agency will send you a yearly statement that details how much interest you paid for the tax year.

 

◊ You can carry it forward for 5 years.

 

 ♦ Find out more here.

Charitable tax credits

 

♦ For charitable donations, you will get a federal and provincial non-refundable tax credit. 

 

◊ Find out more here.

 

♦ A First-Time Donor Super Credit (FDSC) was introduced in 2013.

Property tax credits

 

If you pay rent above a certain minimum amount, you may be eligible for a tax credit in Manitoba and Ontario.

Tax-deductible expenses

 

Tax-deductible expenses reduce the gross amount of your income, thereby lowering your income bracket and the taxes you will pay.

Medical expenses


You can claim eligible medical expenses for yourself, your spouse or common-law partner, and you or your partner’s children (born in 1996 or later).

 

♦ Expenses from any 12-month period ending in the applicable tax year (and not claimed in a prior year) can be claimed (even if you did not pay them in Canada).

 

♦ The deduction only applies if the amount of medical expenses is more than the lesser of 3% of your net income or $2,171 (in 2014).

 

♦ A list of eligible medical expenses can be found here (including prescription drugs and medications, medical services provided by qualified medical practitioners, the cost of medical tests, and much more).

 

♦ Medical expenses which are not eligible can be found here.

 

♦ Find out more here.

Moving expenses

 

 

If you moved at least 40 km closer to a new school or work location, moving expenses can be claimed on your income tax.

 

♦ If you moved for post-secondary studies, your expenses can only be deducted from any taxable portion of your scholarships, fellowships, bursaries, certain prizes, and research grants.

 

♦ If you moved to work, including for summer employment, you can deduct your expenses from the income earned at the new work location.

 

♦ Find out more here.

Childcare expenses

 

Child care expenses may be claimed if you or your spouse/common-law partner paid for childcare services in order to earn income, education, or conduct research. These expenses can be claimed for children under 16 years of age or for a child with a mental or physical impairment.

 

Find out more here.

Tax benefits for apprentices and journeypersons

 

Tradesperson tools deduction: Provides employed tradespersons (including apprentice mechanics) with a tax deduction to help cover the cost of new tools.

 

Additional tool deductions are available for apprentice mechanics

 

Capital cost tool deduction: A non-refundable tax deduction on the cost of tools that reduces taxes owed.

 

♦ The Apprenticeship Incentive Grant and Apprenticeship Completion Grant are both considered to be taxable income.

Provincial tuition rebates

 

There are tax incentives to live in some provinces after graduation. You must have graduated from a recognized post-secondary institution (in the province or elsewhere) and now live and pay taxes in the province.

 

♦ The Manitoba Tuition Fee Income Tax Rebate: If you graduated in 2007 or later, you can be eligible for an income tax rebate worth 60% of your eligible tuition fees up to $25,000 (paid over 6 to 20 years).

 

◊ If you are living in Manitoba and attending a post-secondary institution, you can receive a 5% tax credit advance, up to a certain amount.

 

♦ The Saskatchewan Graduate Retention Program: If you graduated in 2006 or later, you can receive a refund of up to $20,000 in tuition fees.

 

♦ The New Brunswick Tuition Rebate: This is a rebate of paid Provincial income taxes, up to 50% of the tuition you paid since 2005 with a maximum rebate of $20,000.

 

♦ The Nova Scotia Graduate Retention Rebate was eliminated as of January 1, 2014. It can still be claimed by graduates for the 2013 tax year. 

Are scholarships, grants and bursaries taxable?

 

♦ Many scholarships, grants and bursaries qualify for a tax exemption, meaning they are not counted as part of your taxable income.

 

Full-time students: Students enrolled in full-time post-secondary education are eligible for a scholarship exemption if they are able to claim the full education amount.

 

Part-time students: If an individual in part-time education is eligible for the part-time education amount, the scholarship exemption is limited to tuition fees and program materials. Depending on the cost of the program, these individuals may also eligible for the basic scholarship exemption of $500.

 

$500 basic scholarship exemption: If an individual is not eligible for the full-time or part-time education amounts, they are able to reduce the taxable amount by $500.

 

Artists’ project grants: For a grant that has been received/used to produce a literary, dramatic, musical or artistic piece, an individual may reduce the taxable amount by claiming the $500 scholarship exemption or claiming the eligible expenses to produce the work.

 

Research grants: Expenses that were necessary to carry out the research project are subtracted and the remaining amount must be claimed as taxable income.

 

Find out more here.

 

♦ Some awards are taxable:

 

Prizes and awards you received as a benefit from your employment or in connection with a business are not eligible for the $500 tax-free amount.

 

The Apprenticeship Incentive Grant and Apprenticeship Completion Grant are both considered to be taxable income.

 

♦ Learn more about students and income tax here. If you are unsure if your award is taxable, contact a CRA representative.

Claiming RESP withdrawals on your tax return

 

♦ Interest earned on RESPs as well as all government contributions must be claimed as income by the student who has received them, you will receive a T4A slip for the amount.

 

♦ Due to the generally low income of students and tax credits, you will probably not have to pay any income tax. However, you may have to be strategic in how much you withdraw and when.

Claiming interest and investment income on your tax return

 

♦ You must report interest and investment earnings on your tax return.

 

♦ If you earned less than $50, you may not receive a T5 tax slip, however you still have to report this income.

 

♦ Interest earned in a Tax-free savings account (TFSA) does not have to be claimed. Learn more about TFSAs here.

Resources for information about income tax

 

♦ Information from the Canada Revenue Agency:

 

◊ Learn more about students and income tax.

 

◊ Learn the top ways for students to save at tax time.

 

◊ View a list of topics/services for students.

 

◊ Find a detailed list of tax credits by province/territory.

 

GetSmarterAboutMoney has tax information for students.

 

♦ View your provincial/territorial government website for additional details about personal taxes.