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Feb 05, 2021 04:09 PM EST

Canadian Tax Law Makes Student Life More Affordable

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Canadian Tax Law Makes Student Life More Affordable

(Photo : Canadian Tax Law Makes Student Life More Affordable)

There are many colleges and universities in Canada; that's a lot of students who may need financial guidance. Student life can be fun, but also expensive. Knowing a little bit about Canadian tax law may come in handy when tax time comes around. Students will discover that there are numerous deductions they can claim. 

Some Famous Universities in Canada Are: 

  • The University of Alberta 

  • The University of British Columbia - the largest in Western Canada 

  • The University of New Brunswick 

  • The University of King's College 

  • The University of Toronto - Canada's largest university

Do Students Pay Income Tax in Canada?

Canadians sometimes pay higher taxes than those in the USA, but they are proud of their universal health care and education system. Many colleges tend to be affordable too. Students in Canada do pay taxes, but the government allows students certain deductions to make life more affordable. The government requires you to fill out a T4A Slip to list your taxable income. Both undergraduate and graduate students may benefit from knowing what they need to file.

Some Types of Income Canadian Tax Law Requires Students to File:

  • Employment income plus tips 

  • Scholarships and Grants, including:

  • Research grants

The amount you deduct cannot be more than the amount of the grant. You can deduct travelling expenses, equipment, lodging, fees paid to assistants, and meals.

  • Artists' projects grants
  • Apprenticeship grants

    Grants can be as much as $4,000 and must be filed.

  • Scholarship Grants
  • Investment income

Students are not required to report lottery winnings, windfalls, or gifts as income. 

Read more about students and income tax in this guide from the CRA

Deductions for Students in Canada

  • Moving

Relocation for school is no small feat. You can save your receipts and deduct it from your taxes. 

  • Child care

You may have to hire someone to watch your child for some reason while you work and go to school. You can only do this if the child had a physical or mental problem during the time of care.

Non-Refundable Tax Credits

Canadian tax law allows for other deductions for students called non-refundable tax credits. You can only use them to reduce your tax debt to zero. You cannot get a refund by deducting expenses over the grant amount. This is where the meat of student savings resides. Some of the allowable deductions are:

  • Interest paid on your student loan

The Canada Student Loans Act, the Canada Student Financial Assistance Act, and the Apprentice Loans Act allow students to deduct their interest on their student loans.

  • Education Tax Credit 

Allows a student to claim tuition expenses.

  • Textbook Tax Credit

EExpenses Not Eligible for Tax Credit:

  • extracurricular student social activities

  • transportation and parking 

  • boarding and lodging 

  • medical expenses 

  • cost of books

Canadian Tax Law Conclusion

Canadian tax law is strict in that it does not exempt fellowships from being listed as an income source. Students have to pay taxes, but the government allows deductions and credits that should lower your taxable income. The government allows deductions only for expenses necessary for students' educational welfare. Child care and moving expenses add up and can be deducted. Bottom line, Canada allows students many deductions, and this means more money left in their pockets to enjoy pursuing their educational dreams.

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