Credits, Deductions & Taxes... Oh my

Tax deductions are viewed as more valuable because they can generate bigger savings. Deductions are subtracted directly from your taxable income. You do not have to multiply this deduction by a percentage. For example, if you earned $20,000 and made a $1,000 RRSP deduction, your taxable income would be reduced to $19,000.

Deductions that students typically overlook include:

• Moving expenses

Most tax credits are non-refundable, which means that they can’t generate a tax refund on their own. You need to owe income tax during the year in order to gain the tax return benefit. Unfortunately, you also have to multiply them by 15% before you apply them to the tax owing. For instance, if you claim $5,000 in tax credits, you will receive a return of $750 from the tax that you have already paid. These tax credits are contained on Schedule 1 of the T1 return.

Some credits can be carried forward until you are eligible to use them! To claim these credits and carry them forward, you must file a tax return even if you are not generating income. When you are earning an income and paying taxes you can then recoup those tax credits.

Examples of expenses that can be carried forward include:

• Public Transit amounts include your bus pass supplementary fee and any other public transit cost for the entire academic year. 
• Disability Amount deduction is available for persons suffering prolonged mental and physical impairments. To qualify, there must be adequate documentation from a doctor (T). For more information, see http://www.cra-arc.gc.ca/disability/
• Student loan interest includes loans received under the Canada Student Loans Act, or the Canada Student Financial Assistance Act. This does not include interest from a student line of credit. Only you can claim this deduction. If you do not have enough taxable income to utilize the credit, do not claim it that year; instead, carry it forward and use it to reduce your taxes in the future. The time limit is 5 years.
• Tuition, Education, Textbook amounts can be transferred to spouse/partner, parents, and grandparents if you do not need them and do not want to carry them forward. There is a $5,000 limit on the amount that you can transfer. The difference should always be carried over. Note: Eligible tuition fees do not include student association fees, transportation and parking, meals and lodging and the cost of books. These costs are covered by the textbook amount that you claim on your return.

This step is not mandatory to file your taxes but it’ll make your life so much easier. By creating an account, you’ll be able to monitor the status of your return, view your notice of assessment, gain access to various tax slips and much more. If you’re filing for the first time, this will be your last step in the process. In order to access to the services of “My Account” you will need your:

• Social Insurance Number
• Date of birth
• Current postal code
• Previous or current tax return that has been filed and assessed

The tax slips and other important documentation will be mailed to you or you can access it on CRA’s My Account. Your T2202A can be accessed on MyMohawk. You’ll have to keep track of your own receipts however.

If you haven’t placed all your documents in a little handy dandy notebook, then it’s time to start looking. Here’s a checklist of documents that may be applicable to you.

Tax Slips:

• T4 (employment income and payroll deductions)
• T4A (scholarships, bursaries or payments from a RESP)
• T5 (investment income such as interest from bank accounts)
• T2202A (tuition, education and textbook amounts).

Before we get too far ahead of ourselves, let’s make sure you’re eligible to file online. To start, the CRA simply needs a record of your date of birth. If you have a SIN and have worked in the past, generally that will be enough. If in doubt, don’t hesitate to call the CRA and confirm. You’ll have to submit a paper version for this tax year if you are not eligible for NETFILE. You can find a complete list of eligibility requirements, here.

Once you submit your first tax return, you’ll be eligible for NETFILE for the coming tax years. In addition, if you need to file taxes for any year prior to the 2013 tax year, you’ll need to submit a paper version. A few of the programs listed below have older versions that will allow you to enter your information electronically and then print it out for you to mail to the CRA.

There’s really no reason you shouldn’t file online. The entire process is quick, painless and secured. Not to mention you’ll be able to enjoy your tax refund in as little as eight business days. That’s much better than having to wait for 4-6 weeks if you decide to go the paper route.

When you decide to file your taxes online, there are dozens of programs out there that will do the job but it comes with a price tag. As a student, that’s just unacceptable. Luckily, there are several free programs that are certified by the CRA. Some have restrictions while some don’t. So, what’s the right program?

For the 2016 Tax Year:

These programs will do the job for zero cost. SimpleTax has the slight advantage compared to the other 4 since it’s more user-friendly and supports numerous devices. Regardless, all five of these programs are suitable for everyone, not just students. There are several drawbacks for the other “free” programs listed on the CRA website. For example, some programs are free to download but will ask for payment once you’re about to submit. Other programs may limit you to one return only or require you to have made a certain income. Once you access one of these programs, you’ll be asked which forms you have or what deductions you’re claiming. Just follow the on-screen instructions and input the right information and values.

That’s it! If you’re filing a paper return, just print it out and attach any important documents or receipts. Here’s where you’ll need to send the return depending on where you currently live. If you used NETFILE, the program will submit your return to the CRA. Keep your important documents on hand just in case the CRA calls to confirm any information. Now just kick back and relax!

Other Documentation:

Last year’s notice of assessment or reassessment Other CRA correspondence Disability tax credit certificate

• Attendant expenses for persons with disabilities
• Educational Assistance Payments (EAP portion of RESP withdrawals)

Receipts:

• RRSP contribution slips
• Medical expenses
• Transit pass (yes, your Mohawk bus pass counts)
• Charitable donations
• Interest paid on your student loans
• Child care expenses
• Moving expenses
• Rent or property taxes

Tips for Students:

• Understand the tax laws; the more you know, the more you can possibly save
• Use resources from an official source, like Canada Revenue Agency (CRA)
• Consult with a tax professional when needed
• Hold on to your tax documents and records for 6 years
• Be pro-active in tax planning; keep all your slips and back up documents in one central place
• File on time to avoid penalties and interest
• Keep track of your carry-forwards so you don’t lose these benefits
• Maximize your tax deductions and tax credits to minimize your taxes

Tax Filing Tips:

• Moving expenses can be deducted against taxable scholarships, research grants, and other such awards, if you moved at least 40km in order to attend a post-secondary educational institution. You can also deduct moving expenses that result from moving back and forth from university after summer break. You can carry these moving expenses forward until you have enough eligible income to claim them.
• Full time students can claim the full time education deduction. Post-secondary scholarships, bursaries, and awards are not taxable up to the amount required to support you in that program.
• Don’t forget to claim your GST/HST tax credit. This is a tax- free quarterly payment that helps individuals and families with low or modest income to offset all or part of the GST or HST that they pay. You must be 19 years of age to receive this credit. 
• The Ontario Trillium Grant combines, the Ontario Sales Tax Credit, Ontario Energy and Property Tax Credit, and the Northern Ontario Energy Credit into one payment. You must also be 19 years of age to receive this credit and payments are made monthly. Residence fees are not eligible for this credit because this is not considered your principal residence. 

Resources:

• Students and Income Tax Guide (including apprenticeships) – additional information about filing your income tax return
• Income Tax Calculator
• Your personalized CRA account – allows you to view or modify your return, track your refund, check your payments and much more!
• Tax Ombudsman
• CRA’s Fairness and Taxpayer’s Bill of Rights
• Community Volunteer Tax Program – CRA runs a number of free service clinics when your income is low with trained volunteers. Check it out if you need help or want to volunteer
• Mohawk College's Volunteer Tax Clinics – be on the lookout for our tax clinics every March and April