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The
Sweet Smell of Refunds!
Wallet-filling
recipes for the lean days of tax time
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Just as you’ve put the finishing touches on what you thought
was the most boring work you’ve ever tackled -- that paper
on Early Design of 17th Century Irrigation Systems, along
comes …you guessed it -- Tax Time! In fact even we had to
double up on the caffeine just to wade through the government
forms to write this story. But alas, we’ve outlined what
you need to know to keep more of your money from the long arm
of the taxman.
Getting it together: Fun with forms, forms and more forms
If you are filing a tax form (which every student
should do - if not at least to get the GST / HST tax rebate),
you’ll need to track down some basic forms, which you should
have received by the end of February. Assemble all the necessary
forms and receipts ready to make the process easier.
Your taxable income
Regardless of how miniscule you’re your summer
job pay seemed or how skimpy the interest from your savings account
was, you still have to share this information with the government.
You should have forms for the following:
- Employment Income and any deductions on your pay (T4 slips)
This includes all summer and part-time jobs
- Money received from scholarships and bursaries or payments
from RESP’s (T4A slips)
- Interest from investments such as bank accounts, Canada Savings
Bonds as well as stock dividends, or realized earnings from
stocks and mutual funds (T5 slips)
Even if you didn’t get a slip for some of
the money you earned, such as tips and cash bonuses, you’re
still expected to declare it. Even if you were the slowest, clumsiest
waiter around, the government will likely expect that you would
have made some tips.
Deductions and Credits: Giving Credit where Credit is due
On the flip side you should also have receipts
which allow you to claim credits and deductions - which can be
claimed against your taxable income and thus reduce the amount
of income you are taxed on. With many students the deductions
can help bring the taxable amount to zero. Do I smell refund?
- Form T2202 Education Amount Certificate
- Form T2202A Tuition and Education amounts in Canada
- Form TL11A University outside Canada
- Form TL11C Commuter fees to the U.S.
- Form TL11D Educational institutions outside Canada (for a
Canadian resident)
- TL11B Flying school or Club
The employers you worked for, the school you attended,
or company that manages your investments should have sent these
receipts to you, so if you haven’t received them by now contact
them to remind them.
Other credits and deductions without forms:
On top of these deductions there’s other good
news in the wonderful world of student tax:
Personal exemption -- Keep in mind that
your biggest bonus is usually the basic personal exemption which
for 2000 is $7231. If all your earned income is less than this
amount you can breathe a whole lot easier. If you earned over
that amount, not to sweat it yet. The following exemptions could
lead you to tax free territory:
- The education amount You can claim $200 for every month
(or part month) that you were in school full-time at a qualifying
post secondary insitution during the year. Full time is considered
60% or greater - and the good news is you don’t have to
subtract for those early morning classes that you, shall we
say, “excused” yourself from! If you are part-time
you still can deduct $60 a month. Keep in mind that if you were
in a full-time program but only went part-time because of a
mental or physical impairment you may still be able to claim
the full-time credit. Have your health practitioner fill out
part 3 of Form T2202 or Form
T2201 (Disability Tax Credit Certificate)
- The first $3000 of scholarship or bursary money is
now exempt from taxation (a huge jump from the paltry $500 that
was exempt last year). You now only report amounts in excess
of $3000.
- Interest that you paid on student loans (paid after
1997). The good news is that the government now feels that the
money you invested in your education should in fact be treated
as an investment. What this means is that interest that you
pay on loans for your education is now tax deductible just like
money someone borrowed to invest in that dot.com stock that
crashed and burned. Of course the good news is that your degree
will likely be around long after the Dot.com company has evaporated.
Any money that you pay on student loan interest can be claimed
this year or even carried over until after you’ve graduated
and are actually making an income to deduct it against. You
can claim this year's interest payments on any of the next 5
year's returns.
- Moving experience -- If you moved, you may also be
able to claim some of these expenses as a deduction (as long
as it moved you 40 kms or more closer to attend school full-time
or closer to your summer or work term employment). This can
be great if you traipsed half way across the country from the
metropolis of Wawa, Ontario to attend Acadia, or if you shelled
out for the flight to that remote wilderness counseling job
at Camp Itchy Ima Scratchin. Keep in mind that the moving
expenses to attend school can only be used against income from
awards, and the moving expenses for a job, only used against
the earnings from that job.
Transfer Time: The good news about your
tuition and education deductions is that you can transfer these
to a parent or spouse or carry it over until a future year. What's
important to know is that if you do carry it forward you cannot,
in future years, decide to transfer it - so you have to decide
now...oh life's big decisions.
Using these credits and deductions should help
bring your taxable income to zero. If not, you may still have
some more tools to get you there. In next month's MoneyRunner
we'll look at some lesser known credits and deductions
leading to tax's ground zero.
For further detailed forms and bulletins:
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Next
month:
Less-known deductions and strategies -
How to use them to your advantage
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