The Ultimate Guide to Tax Deductions for Canadian Students

 

Understanding the diversity and extent of taxes and tax deductions is challenging for Canadian students. However, various tax deductions ease the financial burden on students and effectively lead to substantial savings. 

This comprehensive guide outlines the key tax deductions Canadian students can claim on their returns, ensuring maximum benefits.

Thornhill students can seek professional tax deduction assistance from Accplus for tax accounting services and accounting solutions to make their refund processes smoother.

Education, Tuition, and Textbook Return Amounts

Understanding Tuition Tax Credit

The tuition tax credit is one of the paramount substantial tax breaks accessible to Canadian students; it allows them to claim the total tuition fee to reduce their taxable income. However, students are eligible for this credit on one condition: the fee must be for a post-secondary educational program that lasts three consecutive weeks.

How to Claim the Tuition Tax Credit?

● You need to get a tuition and enrolment certificate from the educational institution.

● Enter the required amount on the income tax return.

Understanding Textbook and Education Amounts

The federal education and textbook income amounts were officially eliminated, but in 2017, some territories and provinces still offered these credits. It is best to check your respective provincial or territorial tax credits to verify their qualification.

What Is Meant by Student Loan Interest Deduction?

The interest paid on student loans can be claimed as a non-refundable tax credit; this applies to the loans received under the Canada Student Loan Act, the Canada Financial Assistance Act, and many other offered territorial or provincial programs.

How to Claim the Student Loan Interest Deduction?

● It is best if you collect the annual/yearly statement from the loan provider that indicates the amount of interest paid.

● Enter the amount on the tax return slip.

What Is a Public Transit Tax Credit?

The federal public transit tax was officially eliminated in 2017, but some Canadian territories and provinces still offer it. This deduction applies to the monthly or annual cost of transit passes.

How to Claim Public Transit Tax Credit?

● The simplest move is to keep your receipts safe from the start; it helps provide proof of purchase.

● Check the provincial tax return for specific credit claims.

What Is Meant by Moving Expenses?

Students can claim moving expenses if they are moving to attend a full-time post-secondary institution and if their new residence is within a forty-kilometer boundary of the institution. The moving expense deduction also applies to students moving for summer employment, a holiday job, or co-op replacements.

Eligibility for Moving Expenses

● It includes all the travel expenses, including accommodation and food.

● It includes transport, storage, and temporary living costs for approximately fifteen days.

How to Claim Moving Expenses?

● You must complete Form T1-M, a moving expenses deduction, to take advantage of the moving expenses.

● Then, you will enter the amount required on the tax return.

Does Child Care Expense Come Under Tax Deductions?

The childcare expenses sustained while attending classes are only deductible for students with children. This tax deduction includes the costs of childcare services, daycare, and nannies.

How Can I Claim It?

● The easiest way to avoid all hassles is to collect all the receipts for childcare expenses.

● Then, you will have to complete Form-T778, Child Care Expenses Deduction.

● Enter the required amount on the tax return.

What Is Canada's Employment Amount?

The Canadian Employment Amount gives a tax credit related to work expenses, so fully or part-time employed students can claim this amount to minimize their taxable income.

How to Claim Canada's Employment Amount?

You must only enter less than $1287 from your employment income on the tax return.

Tuition Fee Transferred from Children or a Child

If a student has yet to use all of their tuition tax credit, the unused amount can be effortlessly transferred to a parent, spouse, guardian, or partner. The tuition-free transfer process helps students save on taxes.

How to Claim Tuition Fee Transfer?

● The student will complete the transfer section at the back of their T2202 certificate.

● The transferee then enters the exact amount on their tax return.

Fellowships, bursaries, and Scholarships – What's the Catch?

The fellowship, bursary, or scholarship income is usually nontaxable on one condition: the student is enrolled in a program equivalent to the educational amount. If the amount exceeds tuition fees and program expenses, it is taxable only for part-time students.

How to Claim Tax Deductions in Fellowships, bursaries, and Scholarships

● The easiest way to claim tax deductions is through reporting the income to your tax return.

● Deduct the eligible amount.

What Is the GST/HST Credit?

The GST and HST credit a nontaxable payment that assists individuals and their families with lower incomes to the cost of GST and HST they pay. Many students can qualify for this credit for tax deductions.

How Do You Claim the GST/HST Credit?

● The first step is to file an annual tax return.

● If you fulfill the eligibility criteria, you will receive the credit.

What Is Meant by the Lifelong Learning Plan?

The LLP, or lifelong learning plan, allows you to withdraw approximately $10,000 annually from the RRSPs to finance your full-time education and personal or spousal training. The maximum withdrawal is roughly $20,000.

How to Claim the LLP?

● First, you must complete Form-RC96, Lifelong Plan Request to Withdraw Funds from an RRSP.

● Write the exact withdrawal amount on the tax return.

Working While Studying?

Students can reduce the tax on their income through different credits and deductions; precisely the income earned through summer jobs or part-time employment. Additionally, a working student can claim the following according to the Canada Employment Amount;

EI Premium: The employment insurance claims on 31200 tax returns

CPP Contribution: The claim contributions made through 30800 and 22200 tax returns

Conclusion

Claiming tax credits and deductions significantly reduces Canadian students' financial burden and helps them save their income, effectively manage finances, and much more. However, the intricacies and eligibilities of tax deductions can be complex; for students in Thornhill and nearby, professional assistance is available through Accplus. Here at Accplus, we offer a range of tax accounting services Thornhill, financial business services Thornhill, and bookkeeping services Thornhill. Our team is an expert in navigating tax files and maximizing tax credits and deductions, and our services are tailored to meet your needs!