By Scott Shpak
Completing tax returns for the first time is one of the many “adult” rites of passage after you get your degree or diploma. Tuition and student loan maintenance are tax considerations, and the transition from student to employee includes a number of new issues you’ll have to address as well.
Money spent on tuition, education and textbooks makes you eligible for credits that can reduce the amount of income tax you’re required to pay. Your school should provide you with a certificate that shows how much tuition you’ve paid, which you can claim on your tax return using Schedule 11. If a parent helped you with tuition, that’s okay as long as your employer didn’t reimburse them. You can’t claim any tuition amount if it was paid by a government job training program. You can transfer these credits, however, to a family member who helped pay your school costs.
The CRA sets education and textbook amounts. You can claim an amount for the education credit for each month you were in school. The amount is intended to provide relief for living expenses, so you can’t claim it if your program offered meals and lodging as part of your course. Different rates apply for full-time and part-time students. The textbook amount works the same way, multiplying the rate by the number of months you were in school as reported on the information slip from the institution. Full-time students should use the months in Box C and part-timers should use Box B. If you’re not claiming the education amount, you can’t claim the textbook amount.
Student Loan Payments
With any luck, memories from your years in school will last much longer than your student loan payments. Writing for CBC News in 2014, Aleksandra Sagan pegged the average national student loan debt at around $25,000 for a typical graduate. You can claim the interest paid on your loans to generate a tax credit, but only if the loans meet guidelines set by the Canada Student Loans Act or the Canada Student Financial Assistance Act. You can’t claim this credit if you’ve consolidated your student loan with other debt, and it isn’t refundable (it can reduce any tax you owe to zero, but an excess won’t generate a refund). You can carry forward unused amounts up to five years, however, and claim them in a year when it’s most beneficial to you.
If your new job requires you to move at least 40 kilometres closer to its location, you may be eligible to claim expenses related to the move. Eligible expenses include:
* transportation costs for packers, movers, in-transit storage and insurance
* travel expenses for your car, meals and hotels
* temporary living expenses for meals and lodging for up to 15 days
* certain costs associated with selling your old home or buying a new one.
The CRA offers both detailed and simplified methods to calculate these expenses, depending on the nature of the expense. The detailed method requires receipts, while the simplified method uses flat rates. If you choose the simplified method, though, keep in mind that the CRA may require proof that you did indeed pay these costs, so keep your receipts.
When you begin a new job, you’ll probably face a barrage of required paperwork. One form that impacts your tax situation is the TD1 Personal Tax Credits Return. This form helps your employer calculate how much to deduct from your pay to cover both provincial and federal income taxes. It allows you to fine-tune your payroll deductions so they match your particular tax scenario. You can even ask to have additional tax deducted. If enough tax isn’t taken out at payroll, you might have to pay additional amounts when you file your return. If too much is taken out, you may have a big refund, but this is money you were entitled to receive through the year and you don’t earn any interest on overpayment. Consider updating your TD1 annually, or whenever your life situation changes in a way that might affect your taxes.
As an operations and technical projects manager in the photofinishing industry, Scott Shpak is also an experienced audio engineer and musician, as well as Editor-in-chief, feature writer and photographer for Your Magazines Canada.