“Taxes are the coolest topic” said no one ever—but when it comes to your money, knowledge is power. And that’s exactly what we’re here to give you: the power to file your taxes confidently and potentially save you some serious cash.
So, grab that oat milk latte, put on your favourite playlist, and get ready to rock this tax season with our tell-all tax guide for students.
- Filing taxes as a student can be daunting, but it’s important to understand how the tax system works in order to save money and avoid penalties.
- Students can claim various tax credits and deductions, for items such as tuition costs, moving expenses, and student loan interest, to reduce the taxes they owe.
- Even if you don’t owe any taxes, it’s still a good idea to file a tax return as a student, since you may be eligible for a refund or certain tax benefits.
Understanding tax terminology
Do phrases like “taxable income” and “tax brackets” make your brain hurt? We feel you. After all, it’s a truth universally acknowledged that taxes—and the CRA-ziness of tax jargon—can feel like a migraine-inducing nightmare.
That’s why TurboTax is designed to make the tax filing process easy and affordable. Nightmare no more!
So fear not. Here’s an easy-to-understand breakdown of all the terms you’ll need to know on your quest to file your taxes like a pro.
What is the CRA?
CRA stands for Canada Revenue Agency, and when it comes to taxes in Canada, the CRA is the top dog. This federal government agency is responsible for ensuring everyone pays their fair share of taxes. It also enforces tax laws and administers a number of government benefits, credits, and programs.
What is a qualifying student?
You know you’re a student, but does the CRA consider you a student (or qualifying student, in CRA lingo)? Because all the awesome tax stuff we’ll go into below won’t apply to you unless you fit the CRA’s qualifying student criteria. To be a qualifying student, you need to:
- Be enrolled in a qualifying educational program at a designated educational institution. Canadian colleges and universities are all designated educational institutions.
- Be a full-time student or be enrolled in a specified program that requires you to put in at least 12 hours of coursework each month.
What are income tax rates and tax brackets?
If you’ve tapped your debit card in a store, you’ve paid GST/HST on your purchases, which means you’re already familiar with the idea of tax rates.
GST/HST is a sales tax that’s charged on most purchases. Your next-door neighbour, Mateo, who’s making big bucks as an associate at a law firm, likely pays the same GST/HST rate you and your student friends do, which is kind of a bummer.
On the flip side, income tax rates are progressive, meaning your income tax rates will depend on your income.
In a nutshell:
- An income tax rate is the percentage of your income that you owe as taxes.
- Tax brackets are the income range that corresponds to these tax rates.
But here’s where it can get a bit confusing. Canada has a graduated income tax system, which means people who earn more money need to pay more taxes. That’s pretty fair, right?
But you may not pay the same tax rate across your income. That’s because, come tax time, your income is divided into different portions. Then, each portion is taxed according to its tax bracket.
Here’s an easy way to think of it: Tax brackets are like a ladder, with each rung representing a different income level. Before climbing to the next rung, you must pass the next tax bracket income level.
As you start earning more, you move up the ladder to the next tax bracket, but only the income falling within that bracket is subject to the higher tax rate. This higher tax rate is known as the “marginal tax rate,” which is the additional tax paid for each additional dollar of income earned.
Check out the federal tax brackets and tax rates for the 2022 tax year for more details.
What is taxable income?
Taxable income, as its name indicates, is income that’s taxable. It includes employment income, tips, and the interest portion of withdrawals from RESPs (Registered Education Savings Plans). Not all income is taxable, though. Some income, such as gifts or lottery winnings, is considered tax-free income.
For most people, employment income forms the bulk of their taxable income. If you worked full- or part-time in the previous tax year, your employer would send you a T4 slip with your income and any amounts withheld from your pay and sent to the CRA (for example, taxes and CPP/QPP contributions).
What is a tax refund?
Once you file your taxes, you might find yourself in for a nice surprise—a tax refund, which is the amount the government owes you if you paid more taxes than required.
You might wonder, “But wait, how is it possible to overpay on my taxes?” It happens more than you might think.
For example, you may be entitled to tax credits which can lower your tax deducted at source (if so, fill in a TD1 Personal Tax Credits Return and give it to your employer). Or maybe reading this guide will help you discover some deductions or tax credits to reduce the taxes you owe.
What are tax credits?
As the video game power-ups of the tax world, tax credits can give you a boost by helping you reduce the amount of taxes you need to pay—but you need to be eligible before you can activate them. Tax credits come in two flavours:
- Non-refundable tax credits. This type of tax credit reduces the taxes you owe. While it can bring your taxes down to $0, you won’t get any remaining credit back as a refund. Examples of non-refundable tax credits include the tax credits you get for tuition and paying the interest on student loans.
- Refundable tax credits. A refundable tax credit can net you a refund even if you don’t owe any taxes. Examples of this type of tax credit include the Canada training credit and the GST/HST credit.
Case study: Tax credits
Shamini is in her third year at the University of Toronto’s engineering program. Let’s say she owes $100 in taxes and has a tuition credit of $120. Since a tuition credit is a non-refundable tax credit, she can apply this credit to reduce her tax payable to $0, but she won’t get the remaining $20 back as a refund.
But if that tax credit were refundable (for example, the Canada Training Credit), she’d reduce her taxes to zero and get a $20 refund.
How much tax do students pay in Canada?
There’s no one-size-fits-all answer to this question other than, “it depends”.
Whether you didn’t work or worked part-time—how much income you made and which tax credits you’re eligible for are just some factors that affect how much tax you’ll need to pay.
And even if you did work, you’ll only need to pay taxes if you made more than the basic personal amount. The basic personal amount is a non-refundable tax credit, so if you earned less than this amount, the credit applies to reduce your taxes to $0. It’s an amount that increases every year.
For example, you can earn up to the federal basic personal amount of $14,398 for the 2022 tax year or up to $15,000 for the 2023 tax year.
It’d be nice if there was a simple answer or some quick formula to pop your income into, and you know how much you owe in taxes. Turns out, there’s something even better than a clunky old math formula: the TurboTax calculator.
Plug in your numbers, and presto! You’ll have an estimate of how much taxes you owe.
Free Income Tax Calculator 2022
Fill in your income and expenses and see your refund or taxes owing estimate.
Do students under 18 pay taxes?
There’s no one-size-fits-all answer to this question too. Whether you’ll need to pay taxes depends on several factors, such as the amount of income you make, the type of income, and the tax credits you may be eligible for.
You can get a quick and easy estimate of your taxes using our online tax calculator.
Do part-time students pay taxes in Canada?
Even if you’re attending school part-time rather than full-time, you still have the same tax obligations as a full-time student. So, if you made enough income to owe taxes, you’d have to file a return and pay those taxes.
Which tax credits, exemptions, and deductions can students claim?
As a student, you’re probably not rolling in cash—after all, being in college or university is expensive, and it means you have less time to take on a job outside of school. That’s why you shouldn’t overlook any tax credits, exemptions, and deductions you may be entitled to.
As we mentioned above, tax credits help reduce the taxes you owe. A tax exemption also lowers your taxes by letting you exclude certain types of income (such as eligible scholarships) from your taxable income. And tax deductions reduce your overall tax bill by allowing you to deduct certain expenses from your taxable income.
Read more on common tax credits, exemptions, and deductions for students.1
Do students pay taxes on scholarships or grants?
When it comes to taxes, you’ll hear the phrase “it depends” a lot, and it’s no different for scholarships, bursaries, fellowships, and grants.2 Here’s how the situation stacks up at a glance:
If you’re a full-time vs. part-time student:
If you’re a full-time qualifying student3 in any province or territory, you probably won’t need to pay taxes on your scholarship funds—meaning you can spend your scholarship on the things you need (like books, course fees, and of course, those 10 mega coffees you needed to pull off that overnighter) without worrying about the funds being clawed back later.
But if you’re attending school part-time, the scholarship exemption is limited to tuition and program-related costs. So, if the scholarship is intended to also cover non-education-related costs like your living expenses, you may need to pay taxes on that portion of the funds.
If you’re an international student:
Paying taxes can get complicated if you’re an international student studying in Canada. The important thing to remember is that international students are considered “temporary residents,” which means you’ll need to follow most of the same tax rules as everyone else.4
If you received research grants:
If you received a research grant, you need to include the net amount of the grant in your income.5 You calculate this net amount by subtracting your allowable research expenses from the total grant funds you received.
These expenses include things like wages you paid to a research assistant, minor equipment costs, lab fees, and travel expenses. However, they don’t include your living expenses (unless they’re travel-related), or expenses paid by a university or hospital.
Case study: Research grants
Lowen obtained a $10,000 research grant for the research they conducted for their doctorate thesis in sociology on new approaches to reducing poverty. They had the following research expenses:
- $1,000 for VIA Rail tickets to travel to rural areas for survey research.
- $2,000 for accommodations during these survey trips.
- $1,500 for Anika, the research assistant they hired, which the university reimbursed them for.
To calculate the net amount of the grant Lowen received, they could use the amounts for the VIA Rail tickets and the accommodations as allowable research expenses. However, because the university reimbursed them for Anika’s wages, Lowen couldn’t deduct the $1,500:
$10,000 – ($1,000 + $2,000) = $7,000
After doing this calculation, Lowen included $7,000, the net amount of their research grant, into their income.
Are student loans taxable in Canada?
Your student loans might be keeping you awake at night, but there’s a silver lining: the student loan interest tax credit.
Unfortunately, student loans from other sources aren’t eligible (such as anything you borrowed from Grandma to fund your studies). And if you took out a consolidation loan (which combines several debts into one easy-to-manage loan) to help pay off your student loans, the interest on that loan also isn’t eligible.
Read more: How Student Loans Are Considered for Taxes
Can students claim their tuition?
Let’s face it, tuition fees make up a large part of your post-secondary education’s financial cost, so it’s a no-brainer to take advantage of the tuition tax credit if you’re eligible.
And while this credit is a non-refundable tax credit, which means you won’t get a refund if it’s more than the taxes you owe, the unused part of the tax credit can be carried forward to a future year or transferred to certain family members.
There are some conditions, however. For example, if your employer paid your tuition or reimbursed you for the costs, you won’t be eligible to claim the credit unless your employer included this cost in your earnings. You also won’t be able to claim it if your parent’s employer paid for your tuition.
Can students claim moving expenses?
Moving to be closer to your post-secondary institution can be a hassle, but there is a potential bright side. You may be able to claim your moving expenses6 if the following criteria are met:
- You’re a full-time post-secondary student.
- You moved to be at least 40 kilometres closer to your school.
- Your new home is the place you usually reside.
One caveat: Even if you’re eligible to claim your moving expenses, you can only deduct these expenses from any scholarships, bursaries, fellowships, or research grants that you’ve included in your income.7 This means you won’t be able to claim moving expenses if your income includes only employment income, for example.
These are just some of the tax credits, exemptions, and deductions available. Depending on your personal and financial circumstances, you may be eligible for others.
Luckily, TurboTax automatically searches 400+ credits and deductions for you. You can also schedule a final review with one of our tax experts before you file.
How do you file taxes in Canada as a student?
If you’re using TurboTax, the process is fairly straightforward. Here’s what you need to do:
- Collect your paperwork. Gather together all your tax-related documents and receipts together. For example, you’ll need your T4 slip and your T2202 Tuition and Enrolment Certificate (if you’re claiming the tuition credit). Your employer and university are required to send you these documents by the last day of February so you may receive a copy as early as January.
- Fill out your tax return. Now for the easy part. Sign in to TurboTax and start filling out your return. With all the documents from the previous step in front of you, filling in the numbers and checking all the right boxes will be a cinch.
- Submit your return. Form filled out? One-click to submit, and you’re done. Celebrations are in order! Or at least a well-earned pat on the back.
What happens after you’ve submitted your return?
The CRA will assess your return to see if you owe any more taxes or if you’re entitled to a refund. They might also contact you for further clarification if there were any errors or discrepancies on your return. Once the assessment is completed, you’ll receive a Notice of Assessment (NOA)—which is like a receipt for filing your taxes. It details all the important information about your tax assessment.
How is the income tax for students calculated?
Your taxable income is calculated by subtracting your eligible tax credits and deductions from your total income. Once you know your taxable income, you can use the tax tables included as part of your tax return package to figure out how much tax you owe.
But there’s an even easier way to see how much tax you owe: the TurboTax calculator. You just answer simple questions, and our calculator takes it from there.
And, if you’re under 25 years old, you can get an upgrade at no added cost. Our team of tax experts will help you understand your taxes and make sure you get the most out of your return. [Get Started]
How much return will I get as a student in Canada?
Just like the amount of taxes you owe, the refund you receive will depend on various factors, including the tax credits and deductions you claimed and how much taxes your employer withheld from your pay.
What are the benefits of filing taxes as a student?
Filing a tax return might seem like a hassle, especially if you don’t owe any taxes. Here are a few reasons why it’s still a good idea to file a return even if you’re not required to:
- You might be eligible for certain refundable tax credits you didn’t know about, which would mean a nice refund as a bonus. For example, the GST/HST credit is a tax-free payment sent every four months. You’ll be automatically considered for this credit if you file a return.8
- If you have any earned income (from a part-time job, for example), filing a return helps you start building up RRSP (Registered Retirement Savings Plan) contribution room. Think of an RRSP as a piggy bank that lets you grow your money tax-free until you retire. But there’s a limit on how much you can contribute yearly (that’s the contribution room). Luckily, if you don’t use up this limit, it rolls over to the next year—so when you’re out in the workforce, you’ll have contribution room to get your RRSP off to a nice start.
- Financial adulting typically means entering the world of loans and credit. Lenders usually want to see how much income you’ve earned to measure how much you can afford to borrow. Having an NOA on hand can make applying for credit a breeze.
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Frequently Asked Questions
Yes, students in Canada are required to pay income taxes on their taxable income every year.
A T4A (Statement of Pension, Retirement, Annuity, and Other Income) is issued at tax time to report any income that falls under the “other income” category.
So, for example, if you’re a student who’s received a scholarship, the university or college issuing your scholarship will send you a T4A showing the scholarship amount you received in Box 105.
For the 2022 tax year, a student can earn up to $14,398 before being required to pay taxes in Canada. For the 2023 tax year, this amount will increase to $15,000.
As a student, you may be eligible to claim several tax deductions, including child care expenses and moving expenses.
Students aren’t exempt from income tax in Canada. However, some income, such as income from scholarships, might be exempted from your taxable income.
1 Common deductions and credits for students – Canada.ca
2 Line 13010 – Taxable scholarships, fellowships, bursaries, and artists’ project grants – Canada.ca
3 P105 – Students and Income Tax – Canada.ca
4 Taxes for International students studying in Canada
5 Line 10400 – Other employment income: Net research grants – Canada.ca
6 Line 21900 – Moving expenses: Are you a full-time student? – Canada.ca
7 Line 21900 – Moving expenses: Are you a full-time student? – Canada.ca