As Ontario moves ahead with its revamped Ontario Student Assistance Program (OSAP), offering free average tuition to lower-income students, there are some tax credit casualties. While there aren’t many major changes compared to last year, Jonathan Braun, manager of tax and estate planning with Investors Group offered a refresher on the current deductions and credits Canadian students can use to lessen their tax burden for 2016.
Tuition tax credit
With the non-refundable tuition tax credit, post-secondary students can recoup 15 per cent (the lowest federal income tax rate) of total tuition fees paid, provided you paid more than $100 for the courses in 2016.
“But students may not necessarily have the income to use those credits,” explains Braun. In that case, they can carry them over until they graduate and are making enough income to use the credit or they can transfer them to their parents, grandparents or spouse. “The limit is $5,000 back (and only) for the current year.”
The 2017 federal budget extends who is eligible to claim the tuition credit to include occupational skills training taken at a post-secondary institution — but that won’t be available until the 2017 tax year.
Education and textbook credits
Both the education and textbook credits are on the way out, but you can still claim the non-refundable credits for the 2016 tax year. With the education tax credit, your educational institution will issue one of these forms (either a T2202A or a TL11) highlighting the months you were in school, and you can get $400 per month if you’re a full-time student and $120 per month if you were a part-time student. For textbooks, you get $65 per month as a full-time student and $20 per month as a part-timer.
“If the student has been claiming the education and textbook amounts in the past and they’ve accumulated these credits and carried them forward, they will continue to carry forward,” says Braun. “They just won’t be able to claim them from 2017 going forward.”
Claiming interest on a student loan
If you paid interest on a student loan in 2016 you can also claim that as well as any interest paid over the last five years you’ve yet to claim. But there’s a catch, says Braun.
“This is only from the government’s student loan programs,” says Braun. “If a student is thinking of consolidating and refinancing their debt, they would want to leave that (government) loan as is… typically your interest would be lower on a government loan anyways.”
“In order to be eligible, passes must allow for some period of unlimited travel for a specific time,” says Braun. “Short term passes are eligible if it gives the student 20 days of unlimited travel in a 28 day period.”
He points out that the trend towards electronic payment cards like Presto doesn’t necessarily mean they can’t be claimed, it just means students need to be strategic when they top up their cards.
“They’re eligible if they provide 32 one-way trips over a period of 31 days,” says Braun. “A receipt also needs to be provided to show the cost and usage of the card.”
Presto users can download their Transit Usage Report through the Presto website for a record of all eligible trips made that tax year.
If you’re moving into residence, or moving at least 40 km to be closer to school you can deduct moving expenses such as transportation and storage costs including packing, hauling, movers, in-transit storage and insurance; travel expenses including vehicle expenses, meals and accommodations; and incidental costs like utility hook-ups and disconnections, changing your address, or replacing drivers licenses.
Braun points out that when you’re moving to school you can only use these deductions on the taxable part of scholarships, fellowships, bursaries, certain prizes, and research grants.
“When you’re moving to start employment or moving home to start a job over the summer (and moving 40 km or more) you’re able to deduct your expenses against the income you’re earning from that new job,” he says. Although residence is already subsidized by the government, students living in a campus dorm can claim a flat tax credit of $25.
Canada employment amount
Students picking up a bit of cash on the side can claim a “dollar for dollar”-based credit of $1,161 under the Canada employment amount, says Braun. It may not sound like a lot when you’re forking over thousands in tuition but it reduces your tax somewhat and any little bit helps, right?
Taxpayers incurring daycare costs for someone to look after kids, while their working, carrying on a business, attending school or carrying on research funded by a grant can deduct those expenses. “Typically the expenses need to be deducted by the lower income spouse,” adds Braun.
Braun also recommends checking your provincial government’s tax resources.
“Each province has their own special tax credit,” he says, pointing out that some have credits based on rent or property tax paid and other provinces have their own tuition credits as well. “The intent of these programs is usually to keep the students within the province after they graduate so their skills and knowledge can be used in that province.”
Whether you’re a student or not, Braun recommends hiring a professional, someone who understands your situation, or at the very least being diligent when you file your taxes.
“You may miss out on a credit you’re otherwise entitled to,” he says.