Students and Taxes in Canada

Furthering your education is an admirable endeavor. Higher education can open up an array of new possibilities for students, from increased job prospects to finding new interests. However, tuition can be very expensive, even if students obtain scholarships and other tuition aid. In addition, students must also pay taxes on income they earn while working, and scholarships might be considered income under some circumstances. Thankfully, Canada provides tax benefits for tuition payments and other similar expenses. Jeremy Scott Law can provide additional information about students and taxes in Canada. Contact our office to learn more by calling (902) 403-7201.

The Basics: Do Students Have to File a Tax Return in Canada?

According to the Government of Canada, students, like virtually every other Canadian, must still file a tax return if they want to claim a refund or are required to pay taxes for the year. Students must also file a tax return with the Canada Revenue Agency (CRA) if they have not repaid all of the amounts they have withdrawn from their registered retirement savings plan (RRSP) under the lifelong learning plan. They must also file if they are required to contribute to the Canada Pension Plan (CPP). Individuals must contribute to the CPP if they have earned more than $3,500 during 2022.

Students might also want to file a tax return to claim a refund or credit if any of the following apply:

• They want the CRA to determine whether they are eligible for goods and services tax/harmonized sales tax (GST/HST) credit
• They want the CRA to determine if they are eligible for the Climate action incentive payment (for those in Alberta, Ontario, Manitoba, and Saskatchewan)
• They want to receive the Canada child benefit (CCB)
• They want to transfer an unused portion of their federal tuition amount to a future year
• They want to report income to increase their Canada training credit (CTC) for future years or report income to contribute to an RRSP to keep their RRSP deduction up to date

In general, students may want to file a tax return if their reportable income is over $3,500 to comply with applicable law. Keep in mind that research grants, scholarships, fellowships, and occasional income are all classified as income. It may be reportable, and students may need to pay tax on those funds.

Even if a student does not have much income, there might be benefits to filing a return at any income level. Jeremy Scott Law may be able to help students decide whether filing a return is required or a good idea for their unique circumstances and answer other questions related to students and taxes in Canada.

Student-Specific Credits and Deductions

To cut down on tax obligations, students may want to take advantage of a few tax credits and deductions that are uniquely available to them. Although obtaining post-secondary education can be expensive, some of these tax advantages might help cut costs.

Tuition Tax Credit

The tuition tax credit provides a non-refundable credit for up to 15% of certain tuition fees for post-secondary education. This credit also carries over if a student does not use the full amount of the credit in a particular year.

The credit reduces income tax, so if income taxes are already zero, the credit will carry forward. That means that even if a student does not have much income while in school, they can use this credit in later years when their income might be higher.

The Canada Training Credit (CTC)

The Canada training credit is refundable credit to help with the costs of certain training fees. It covers tuition and fees for courses that students take throughout the year. The course must be through an eligible educational institution, which includes most post-secondary schools in Canada, but it also includes institutions that provide occupational skills courses certified by the minister of employment and social development. The CTC is only available for students between the ages of 26 and 66.

Canadians can take a $5,000 credit over the course of their lifetime. Students obtain the credit by filing an income tax and benefit return. If they qualify, they will receive $250 in credits for that tax year, which can be used in the current year or saved for another year. Qualification for the credit requires the student to make earned income of at least $10,342 during the tax year. The amount of the credit varies based on the cost of tuition. The credit can be up to 50% of the fees and tuition. It can also be used for fees paid to take occupational, trade, or professional exams.

Student Loan Interest Credit

If students took out loans to fund their education, they might be able to take a credit for the interest incurred while repaying those loans. This non-refundable credit is available for interested paid on loans that fall under any of the following laws:

• Canada Student Loans Act
• Canada Student Financial Assistance Act
• Apprentice Loans Act
• Local government laws similar to these federal loans (provincial or territorial)

Interest paid on private student loans does not qualify for this credit. In addition, students cannot claim interest paid on judgments after the student fails to repay a student loan.

The credit can be used for student loan interest paid during 2022 and the prior five years as well. However, this credit is not refundable, so if the student does not have any tax owed in a particular year without the credit, they may want to wait to claim the credit in later years to decrease tax obligations. In total, the credit is up to 15% of the amount of interest paid on the loans.

Moving Expenses

Students might be able to deduct any moving expenses they incurred to obtain post-secondary education. The move must have been the result of planning to attend school full-time, and the student must have scholarship income. The move must be at least 40 kilometers closer to the new educational institution.

Get Help with Credits and Deductions Unique to Canadian Students

Students and taxes in Canada can be confusing, but if students plan carefully, they can take full advantage of the tax benefits available to them. Jeremy Scott Law may be able to help with this process and ensure that your financial rights remain protected. Learn more by contacting our experienced Canadian tax lawyers at (902) 403-7201.