Facts about Income Tax in Canada
With tax season approaching fast, here are some quick facts about personal income tax liability and some of the most common credits and deductions for students in Canada.
- Canadian resident for tax purposes is not the same as Permanent Resident of Canada. Residency for tax purposes is determined based on residential ties established by an individual. Most international students are Canadian residents for tax purposes, and thus need to report their income and are eligible for deductions and credits.
- If an individual, for example a student, has no income to report, it is still important to file tax returns to receive GST Tax Credit (one of the few refundable tax credits – meaning, you actually get cash) and claim non-refundable Tuition Tax Credit which can be carried forward to be used in the future or transferred to family members.
- Individuals who have not been filing tax returns starting the year they turned 19, most likely missed out on the GST Tax Credit payments they were entitled to. However, that money is not lost, since it is possible to file prior years’ tax returns to claim them.
Possible Credits and Deductions for Students
- Tax-free earnings: Canadian federal personal income tax is calculated based on taxable income, then non-refundable tax credits are deducted to determine net amount payable. For 2017, every taxpayer can earn taxable income of $11,635 ($11,474 in 2016) before paying any federal tax. In short, an individual can earn up to $11,635 without paying any income tax.
- Enjoy a tax-free scholarship: Scholarships and bursaries are tax free for most full-time students, under certain conditions. For part-time students, scholarships are non-taxable up to the amount of tuition paid plus cost of program-related materials. Scholarships at the secondary school level are also non-taxable, while the ones received for post-doctoral studies are taxed.
- Claim your tuition fees: Amounts paid as tuition for both full- and part-time studies, and which are found on your T2202 slip, are claimed as a non-refundable tax credit. This is one of the credits that can be transferred and/or carried forward. If a student does not need the credit to reduce taxes to minimum in a current year, the credit can be either carried forward or transferred to parents, grandparents or spouses. Form T2202 is issued by educational institutions. TRU students can find their forms on MyTRU portal under “My academic records”.
- Receive GST Tax Credit: Individuals with income up to certain amount are entitled to receive GST/HST cash refund up to $400 per year. You do not have to earn any income to qualify. However, it is income related credit and the amount you receive depends on your reported income. International students qualify for the credit as well.
- Recognition of work-related expenses: Every person employed in Canada is eligible for Canada Employment Amount to a maximum of $1,178 – non-refundable tax credit towards reported employment income.
- Deduct your Canada Pension Plan and Employment Insurance contributions: CPP & EI are deductions found on employee’s payroll where both the employee and employer contribute to each of the following programs. The maximum of $2,564 and $836 non-refundable tax credits can be claimed towards employee’s CPP & EI contributions, respectively.
- Get on the bus: For students who depend on transit to get to campus, keep your bus passes to claim Transit Tax Credit. The program also includes electronic passes if used to pay for 32 trips during a 31-day period and weekly passes purchased for four consecutive weeks, provided such passes are acquired on or before 1st July 2017.
- Moved to attend university? If you move more than 40 kilometers to attend a post-secondary institution or take a summer job, you may be able to claim moving expenses against your employment income at the new location. Deductible expenses include travel, transportation, storage and cost of meals and temporary accommodation for up to 15 days.
- Paying your student loan off? If you have graduated or left school and are paying off government student loans, you can claim your annual interest as a tax credit. However, interest on private loans and lines of credit does not qualify.
- Got some cryptocurrency? A gain or loss from a bitcoin transaction will be treated as either income or loss from business or property, or a capital gain or loss. Which has different tax implications.
- Working while studying part-time? Refundable tax credit for part-time students whose employment or self-employment income is over $4,750 but does not exceed $20,917 (for a single person without dependents and who doesn’t claim disability amount). Maximum amount of benefit is $1,218 which is payable if working income reaches $11,028. Full-time students only qualify if have eligible dependents. Form T2202 will indicate whether you were considered to be full- or part-time student during the year.