TAX ALERT – BACK TO SCHOOL TAX TIPS FOR STUDENTS

With fall around the corner and kids back in school this week it is a good time to talk about students and taxes. Many students do not file an annual personal income tax return as they have little or no reportable income. Even if your student isn’t expecting a tax refund there are other benefits to filing a personal income tax return each year.

Education Tax Credits

Both the Federal and Provincial governments offer tax credits for tuition. It is important to note that while these are non-refundable credits (the credits help reduce tax on taxable income rather than refund a portion of the tuition expense) they do not expire. This means that while one may not need the tax credits when one is in school the credits will carry forward until they can be used. This can result in large tax refunds when one enters the workforce.

For those thinking that they don’t qualify for the tax credit unless they are attending college or university, tuition credits are also available for occupational skill courses provided by post-secondary institutions.

What is the catch? In order to claim tuition credits one must file a tax return even if it is just to carry forward the tuition credits.

Tuition Transfers

It is also possible to transfer all or a portion of the annual tuition tax credit by the student to a parent, grandparent or spouse or common-law partner. If the annual tuition tax credits are not needed, up to $5,000 of the tax credit (both federal and provincial) can be transferred. This can result in a larger refund for the recipient of the transfer.

Student Loans

Many students use Student Loans to help pay for post-secondary education. Interest paid on a student loan can be claimed if it was received under:

• the Canada Student Loans Act;
• the Canada Student Financial Assistance Act;
• the Apprentice Loans Act; or
• similar provincial or territorial government laws.

Only the student may claim the interest paid. What is important to note is that if there is no tax payable in a year then it is better NOT to claim the student loan interest on a tax return for that year. Instead, carry forward the interest paid and use it on a tax return in any of the next five years.

Medical Services Plan

When most of us think of GST we think of the added expense when we purchase most goods and services. Did you know Canadian residents, aged 19 and older may be eligible for a quarterly GST rebate? The rebate is based on net income and is generally paid to the recipient quarterly.

Many students do not earn enough money to pay 100% of their premiums for B.C. Medical Services. B.C. Medical does have a premium assistance program that will reduce medical premiums by as much as 100% based on prior year net income.

An application can be made online at https://my.gov.bc.ca/msp/assistance.

What does this have to do with income tax? In order to qualify for premium assistance, B.C. Medical will need proof of income from a Notice of Assessment which is only issued if an income tax return is filed.

Goods and Service Tax (“GST”)

When most of us think of GST we think of the added expense when we purchase most goods and services. Did you know Canadian residents, aged 19 and older may be eligible for a quarterly GST rebate? The rebate is based on net income and is generally paid to the recipient quarterly.

How does one qualify for the GST rebate? You must file a tax return and the Canada Revenue Agency will automatically calculate your eligibility and if you qualify will automatically pay the rebate every quarter.

To learn more or if you have any questions regarding the above information, please contact your Facet Advisors professional, or call us at 604-534-3004.