My mother clipped an article from the Globe and Mail by Tim Cestnick about Student Tax planning that I thought had some really good points in it. As I have a new University student in the family who has been working for the past year part time, much of his advice I already knew about but a great deal was news to me.
As long as your student is not working in a co-op job or the like that makes a lucrative salary, most student shouldn’t have any taxes (Federal, or provincial) deducted from their part time jobs. Fill in whatever forms you need to make sure that does not happen (no point in loaning the government that money).
Scholarship and Bursaries
I did not know that in 2006 Scholarships, fellowships and bursaries became Tax-Free. This is no longer income was news to me, and I was very impressed to read that one. I would even be happier if my child received a scholarship, but she is working hard on that one (I hope).
If you travel and incur expenses for your taxed research grant, you can claim those. Not pertinent to me, but still useful to know.
Tuition and Education Credits
I knew that we could claim tuition on taxes (even though it is about 1/3 of the total pay out for my daughter living away from home). There is also a $400 a month education credit (you’ll get a form stating the student was at the institution FULL TIME) that you can claim as well (up to $5,000 of these credits can be transferred to me, so that is GREAT).
Another HUGE cost for University (especially if you buy them new) are books. In 2006 there was a tax credit for books, student fees and equipment which is $65 a month for a full time student. Good idea, be even better if the books were deductible, but I guess that is too much to ask for.
Student Loan Interest
The interest on accredited loans are deductible as well (make sure you have complete documentation on this).
If your child moves over 40 KM to or from school and then has a job, evidently you can make this claim, but I would look closer into this one and check with the CRA before you do anything.
Get more RRSP Room
It’s important to put in a Tax return even if your child doesn’t have to pay anything, because you are starting to build up their RRSP allowance. I remember one year when I was in co-op, I made far too much money and was going to have to pay taxes, but simply put money in an RRSP in February and after a waiting period cashed it out and ended up losing about $50 in admin fees, but effectively floated that income to the next tax year, not sure the logistics of this now.
Remember also the GST credit comes into play once your child is over 18 as well.
If your child is renting an apartment, remember that tax credit if you live in Ontario. It would be even nicer if I could write off their residence fees, because those are a BIG expense as well. Sounds like a question for my candidates, whenever they knock on my door.
All in all a very informative article.