Canadian Student Tax 101: Benefits

Most people don’t like doing student tax, but there are many potential benefits for students from the tax system to take advantage of. And everyone needs to report their income to the government in order to get these benefits.

Canadian Student Tax Returns

The easiest way to pay more tax than you have to is filing late. Most students are in a refund position, but this isn’t always the case so ensure you get your taxes done on time. What we’re talking about in this post is tax issues for students, what creates taxes, and what documents you need to file them.

Canadian Student T1

A Canada Revenue Agency (CRA) T1 return is the name of the personal tax return every Canadian must file. For most people it’s due April 30th every year.

Part-Time Student Jobs

Many students get part-time jobs during school to help them pay for things. Many also get full-time jobs during the summer. The first thing to know is that all jobs create taxable income that needs to be reported to the government.

TD1 Forms for Students

It’s important to ensure you complete your TD1 forms correctly when you get hired. There is a federal and a provincial version, and both are required.

Completing this form tells your employer what kind of income tax, Canada Pension Plan (CPP) and Employment Insurance (EI) to take off your paycheque. As everyone quickly learns when they enter the workforce in Canada, what you earn is more than what ends up being deposited into your bank account. The CPP and EI deductions go into a national pool that you can use when you retire or if you lose your job, respectively.

Which TD1 to Complete

You’ll have to complete a Federal TD1 and a provincial TD1 form (fill out the one for your province) for each job you accept. If your potential employer doesn’t make you complete them, be suspicious and ask them why not because this is a legal requirement.

Purpose of TD1s

The company you work for during the school year doesn’t initially know about your summer job and vice versa. On the TD1 forms, there is a place to indicate that you have more than one employer (on page 2 of most TD1 forms), so your employer takes enough money off your paycheque. Although most students are in a refund position when they file their taxes, this is a common way some students pay at the end of the year because not enough money was deducted. It’s not your employer’s job to fill out the forms correctly, so read them carefully and ask questions if you aren’t sure.

You don’t need these TD1 forms to complete your T1. Your employer needs to keep them on file for their business and payroll taxes.

Tax Help for Students

Do you need more in-depth help completing your TD1? Contact us using the button below.

T4 for Student Tax

Next February, you should get a T4 slip from each employer. These tax slips indicate how much you earned and how much was taken out of your paycheque and paid to CRA by your employer(s). There are also instances where you may receive a taxable benefit or commission. You’ll need all of your T4s to file your taxes. Your employer will have already sent a copy to the CRA, which they use to match up with the information you provide.

Taxable Benefits

Taxable benefits are often considered perks of a job but can be added to your gross pay. For instance, if you work at a gym and get a free membership, this is a taxable benefit. Similarly, if you work as a delivery driver but get to take the vehicle home at night and over the weekends, this may create a taxable benefit.

Taxable benefits appear in box 40 of your T4 and are included as a part of box 14, your total income. Although these benefits can make life easier for you, they are taxed.

Commission Income

Commission income earned is in box 42 of your T4 and is included in box 14. This is important because commission income makes you eligible for additional tax deductions. If you earn a bonus, that’s different. A bonus will appear in box 14 but not in box 42, so you don’t qualify for the extra deductions.

Work-From-Home

If you’re lucky enough to get a work-from-home position, your employer should provide you with a T2200. This will allow you to deduct a portion of your rent and other household expenses from your income. The form will indicate which deductions you’re eligible to take. If CRA asks for it, you need to send them a copy.

Need tax help?

Submissions to CRA

Many of the forms described above are provided directly to CRA already. Some may need to be provided if CRA asks for them. Make sure you keep them for seven years from your Notice of Assessment (NOA) date. The Notice of Assessment is the letter from CRA indicating that your taxes have been filed and the amount you owe or the refund you’ll receive. Notices of Assessment will be asked for later in life when you apply for loans, mortgages and most other necessities.

Tech Tip

Keeping a PDF of your NOA stored on an external drive or reputable cloud storage account is easier than storing piles of paper and generally costs less too. Make sure you back up your data regularly if going the digital storage route (also good for your schoolwork because profs often don’t accept the, “my thesis was deleted,” excuse).

Scholarships, Bursaries and Grants

Scholarships and bursaries are an area that more people should explore. Thousands and thousands of scholarships and bursaries go unclaimed every year. There are a lot of niche items like this that can apply to very specific situations.

Where to Find Opportunities

Your post-secondary institution will be able to help you find what opportunities they have on file. However, if you expand your search, you might be able to find additional opportunities. Religious organizations, community and cultural organizations, and even high schools may have scholarships or bursaries you can use!

How to Report for Student Tax

When you receive one of these items, you should receive a CRA T4A slip from the organization that awards it. This will be needed for your taxes as, most of the time, these are taxable income. They get reported on your T1 along with your T4 slips.

Tuition

You get a tax credit for being a student, part-time or full-time. Your institution will provide you with a CRA T2202A slip to claim this. These days they don’t mail it to you, and most institutions won’t remind you about it. Most Canadian universities use Blackboard or a similar education software system for choosing classes and doing online courses, and your T2202A is usually available there. If it’s not available, reach out to your institution’s registrar office for help on getting it.

Textbook & Other Costs

We know textbooks are expensive. Students can spend anywhere from $500CAD to $20,000CAD per semester on textbooks and other items for class. If you’re an architecture student, you may have to spend thousands on drafting equipment. But there is nowhere in a CRA T1 to book specific textbook or other receipts. All tuition and textbook tax deductions are calculated and given to you through the T2202A slip. “But I’m in a pilot program and my textbook costs $10,000CAD, how come I don’t get a bigger credit?” You do, the credit is based on what type of program you’re taking and what costs typically are for that type of program. Don’t worry, everyone is covered properly.

Saving Money Tip

If you need to save money on textbooks, the electronic version of the textbook is often cheaper. It’s usually offered as a temporary (length of the semester) license to view the textbook through an online portal, but this can vary from university to university and publisher to publisher. Ebooks also generally have less environmental impact than paper textbooks.

Transfer Tuition Tax Credit to Parents

On the second page of the T2202A form, you can transfer the student tax credit to a parent, grandparent or guardian – or you can keep it for yourself to offset future tax owing on income earned. What’s best for you and your family needs to be decided together.

If your parents are paying for your tuition, they probably want to claim this for themselves. For this to happen properly, first you have to fill out and sign page two of your T2202A form, and you need to file your T1 before they do. If they file before you file and designate them, they won’t get the credit.

Student Tax Clinics

Your post-secondary school will likely have – or at least know of – some student tax clinics. Often, these are provided with little to no cost. Several software packages can help you file your taxes at a low cost. Some software packages are free to students. You must use CRA certified software to file your taxes, don’t let an uncertified program cheat you and take your tax info at the same time. The CRA has a list of certified tax software, including free and paid programs for students, on their website so make sure to check there before choosing a tax software package.

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