School Tax Breaks
Posted by Gail | Filed under Kids & Money, Taxes
Boo Hoo! Summer is almost over and my kids (and I) have to get back to work. This is the first summer in years I’ve been able to take time off with the kids. Usually I’m in full production mode. But as we’ve transitioned from shooting TDDUP’s final season to readying for Princess, I’ve had more days off than I can remember. It has been WONDERFUL.
I’ve always been a little wistful about the end of summer because I so love having my kids around me all the time. This year is significant because so many of Alex’s friends are headed off to university and college. She’s doing a victory lap because she hasn’t yet turned 16 and she’s just not ready yet to hit the halls of higher learning. But for all her friends who are – and for those of you sending your young’uns off — here are some tax-related benefits you need to know so y’all can plan appropriately.
If your kids work, make sure they know to file a return regardless of whether they have to pay tax. If they had deductions taken at source they can get ‘em back. They may also be eligible for the GST rebate, which you can only get by filing a return. And even if they don’t have to pay tax, as long as they had income, they’re building up RRSP contibution room.
All t he money students receive in the form of Scholarships, Bursaries and Fellowships is tax-free money. Tuition has a federal and provincial tax credit attached, as do some related expenses like lab fees and in some cases even a laptop if it’s a mandatory requirement.
TIP: Tax credits may only be used to reduce taxes payable to zero. If a student does not have to pay tax because of a low income, the unused tax credits for the tuition, education, and textbooks can be carried forward indefinitely. And for parents or grandparents helping out, up to $5,000 of the unused federal credits may be transferred to you but must be claimed in the year they are transferred.
There is an education credit available to both full and part time students along with a textbook credit. With the textbook credit the actual cost of the textbooks are not claimed just the credit for each month regardless of whether books were purchased or not.
Don’t lose your moving receipts if you’re shipping Young Sally off to another city to go to school. As long as the move is 40 kilometres or more you can deduct moving expenses against employment income in the year moved or in the year following the move. Googlemap the distance if you’re not sure. These include the cost of travel, meals and accommodation, and expenses related to termination of existing living arrangements (like a lease cancellation fees, or the costs associated with disconnecting and re-connecting utilities, as well as storage and up to 15 days worth of temporary living expenses.
TIP: Moving expenses are a tax deduction. Deductions reduce taxable income, which is then used to calculate taxes payable. Tax credits are a direct reduction in taxes payable. If your kid has moving expenses, claim these “deductions” before claiming the tuition, education, and textbook tax credits since the unused tuition, education, and textbook tax credits may be carried forward indefinitely (or transferred to you) while moving expenses and other tax credits are time limited.
There are other deductions available to students, just as they are available to all of us, like the federal transit pass tax credit and medical expense tax credits. Don’t forget to keep your receipts so you can claim them all.
I wish all the students heading back to university or college a great year. Work hard. Don’t drink your faces off. And keep in mind that now that you’re a grown up, its time to not only build a career, but figure out how you’re going to manage all the money you’ll be earning. Check out this blog for links to tools and advice on the student experience.
August 19, 2009 at 6:13 am
Tuition and education tax credits (TEAs) can be claimed even if you (or your kid) is not studying at a Canadian university. I’ve been studying at Cambridge in the UK for the last 4 years and am still filing away those credits. They’ll come in mighty handy when I eventually move back to Canada.
You’ll have to get a TL11 of some variety filled out and stamped by the university registrar’s office:
http://www.cra-arc.gc.ca/formspubs/clntgrp/ndvdls/stdnts-eng.html
August 19, 2009 at 10:06 am
I loooved doing my taxes while in school – also got a nice fat check! Though, I immediate felt great disdain for the government who got away with an interest free loan!
This year will be the first year I do my taxes with a real, adult, full-time job… woohoo!
August 19, 2009 at 11:12 am
One note on the moving expenses deduction: you can only use it against inocme earned as a result of the move. So if you are moving after working all summer, you cannot use the deduction against your summer income because it was not the result of the move.
August 19, 2009 at 11:14 am
K:
but if you move back home for a summer job, that part is ok!
August 19, 2009 at 2:13 pm
[...] Go here to see the original: School Tax Breaks « gailvazoxlade.com [...]
August 19, 2009 at 2:51 pm
K:
I forgot to say one thing. If you get a part-time job just before school starts, the tax deduction should apply.
August 19, 2009 at 5:24 pm
We’re not there yet, but it is GOOD INFO!
August 19, 2009 at 6:02 pm
Clarification on scholarships, bursaries and fellowships:
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/130/schlrshp-eng.html
You must be eligible to claim education amounts to be exempt.
Another note regarding RESPS. the person who is receiving this money: aka the student, must report this on their return, not the parents.
If a student is transferring tuition amounts, make sure that the T2202A is properly filled out, signed, reported (student return and parents’) and attached to the Grand(parents) return.
As one other person mentioned you don’t have to attend a Canadian university to be eligible for tuition and education amounts, but you do need the correct forms: TL11A etc for the current tax year.
August 20, 2009 at 2:00 pm
thanks gail!
those going off to school should also check out studentawards.com to score some scholarships. free money is always useful!
August 21, 2009 at 3:05 am
[...] Read the rest here: School Tax Breaks « gailvazoxlade.com&#… [...]
September 15, 2009 at 2:24 am
[...] School Tax Breaks « gailvazoxlade.com document.write(''); Share and Enjoy: [...]
September 26, 2009 at 10:53 pm
I like your show Gail but the tuition & education credits, transit pass etc ARE NOT DEDUCTIONS. They are non-refundable tax credits. Credits and decductions are not the same.