How Students Can Reduce Their Income Tax

There are a number of ways that students can reduce their income tax.  Below are a few things you will want to know about if you are a student in Canada.

The Tuition Tax Credit

If you have to pay $100 or more for tuition fees, you can claim a tuition fee tax credit which is equal to 15% of the tuition that you paid.  Keep in mind, the tuition must be paid to a recognized educational institution and it must be for post secondary courses.

The Education Tax Credit

For each month that you are enrolled full time in a qualified post secondary institution, you can claim the education tax credit.  Right now, the amount eligible each month is $60 but that is subject to change at any time, as are any of the other tax rules.  You would be eligible for the education tax credit as long as the courses you are taking are related to your employment.  You will not benefit from this if your employer is paying for your education.

The Textbook Tax Credit

If you qualify for the education tax credit, then you would also qualify for the textbook tax credit.  In 2011 the tax credit was calculated at 15% of $65 for every month that a student qualifies for the full time education tax credit amount.

Carry Forward & Transfer Options

If it’s not beneficial to use up all the tax credits right away, you are allowed to carry forward unused tuition, education, and textbook tax credits and use them in future years to reduce your income tax.  Alternatively, a student also has the option to transfer the unused amount of tax credits (up to $5000 maximum) to their spouse or common law partner, their parent, or even their grandparent.

Exam Fees

Students can now also take advantage of a tax credit for taking some examinations.  The total amount of fees must be over $100 in a year in order to be eligible and there are certain parameters that must be met in order for the exam to qualify.   The exam must be required in order to obtain a legislated professional status or for certification or license in order to practice a profession or trade within Canada.

Student Loans

If you have a student loan, you can claim a non-refundable federal tax credit of 15% for interest that you paid in 2011 and/or the previous 5 years on both new and outstanding loans that have been approved under the Canada Student Loans Program and provincial student loans programs.

For more detailed information on how you can save money on your income tax while a student, check out the Canada Revenue Agency website or talk to your accountant.