Student Tax Tips

You are eligible for a number of student tax credits and deductions that may bring you a refund.

By Dana Newton –

If you are a student, you may think that you don’t need to be concerned about income tax but you really should. You are eligible for a number of student tax credits and deductions that may bring you a refund. Here are some tax tips specifically designed for students.

File a return – “Students should always file personal tax returns, even if their income is not high enough to generate any tax liability, because there will be benefits of one sort or another for doing so,” says Chartered Accountant David Weland, a partner with Taylor Leibow LLP in Hamilton. “They may be eligible for the Goods and Services Tax/Harmonized Sales Tax (GST/HST) Credit, the Ontario Sales Tax Credit and, for the 2009 and 2010 tax years only, the Ontario Sales Tax Transition Benefit and the Energy and Property Tax Credit. They could also have employment income on which taxes have been withheld at source. If the employment income is less than the amount of their personal exemption credits, the taxes that were withheld would then be refunded to them upon filing. This employment income would also increase the amount of their future RRSP contribution room.”

Claim the Tuition Tax Credit – “A non-refundable tax credit is available for tuition paid to a post-secondary educational institution,” says Chartered Accountant Dan Dickinson, a partner with Wilkinson & Co. LLP in Belleville. A non-refundable tax credit is credited against any taxes owing. “The tuition fees paid must exceed $100 and cover a period in that calendar year.” While a number of fees charged by educational institutions qualify as tuition, Dickinson says it is important to note that tuition does not include the cost of living in residence and other personal living.

Claim the Education Amount – “For 2010, the Education Tax Credit is $120 a month federally, ($144 per month for Ontario tax purposes), for part-time students and $400 a month federally, ($481 for Ontario tax purposes), for full-time students,” says Weland. “Full-time generally means a program at a post-secondary level of not less than three consecutive weeks in duration that requires at least 10 hours a week on courses or program work.” The Education Tax Credit is also a non-refundable tax credit. Students should receive form T2202 from their educational institution, which will indicate the number of months for which they qualify for both the Education and the Textbook Credit.

Claim the Textbook Tax Credit – “The federal monthly amount of the Textbook Tax Credit is $20 a month for part-time students and $65 a month for full-time students,” says Dickinson. “This credit is also non-refundable.”

Claim the Student Loan Interest Tax Credit – “The value of this tax reduction is generally equal to the interest paid in the year multiplied by the lowest marginal tax rate in the province,” says Dickinson. “The combined federal and Ontario rate for 2010 is 20.5 per cent.” To be eligible for this non-refundable tax credit, the student’s loan must have been made under the Canada Student Loans Act, the Canada Student Financial Assistance Act or a law of the province governing the granting of financial assistance to students at a post-secondary level.”

Carry forward or transfer your unused tax credit amounts – “You have to use as much of the Tuition, Education and Textbook Tax Credit amounts as you can to offset any excess of your taxable income over the rest of your non-refundable tax credit amounts,” explains Weland. “Then you can either carry-over unused amounts in full and apply them against income on future income tax returns with no expiry date, or you can transfer up to $5,000 a year to a supporting parent, grandparent, spouse or common-law partner.” The carry-forward period for the Student Loan Interest Tax Credit is limited to five years.

Don’t pay income tax on scholarship, bursary and fellowship income – “It is proposed for 2010 and later taxation years, that scholarship, bursary and fellowship amounts received as a student for the full-time education deduction are no longer taxable – for any eligible program,” says Dickinson. “For scholarship, bursary and fellowship income received in connection with a part-time program for which you can claim the part-time education amount, the scholarship exemption is equal to the amount of tuition paid for the program, plus the cost of program-related materials. Any excess amounts received over this are taxable.”

Brought to you by The Institute of Chartered Accountants of Ontario