Mistake #1 – Filing only after turning 18
A common mistake made by young folks is not realizing that you have to file a tax return when you are earning taxable income and not just after turning 18. In other words, you may be a dependent while earning income (summer jobs, online work) but you are still required to file taxes to report your income.
Tip: If your annual income is less than $10,822 then it is not taxable but you are still required to file a return to report it.
Mistake #2 – Not taking advantage of RRSP & TFSA
RRSP contribution room starts early so it makes sense to get a head start in savings at a very early age. Even though making regular TFSA contribution and starting to save sounds so grown up, it is actually one of the coolest things smart young folks do. With regular savings in to an interest paying account, the compound effect grows rapidly from a small amount to a very large amount.
Mistake #3 – Not applying for Tax Credits
There are two basic credits every student gets. One is the GST credit which is a Federal credit. Second is the Provincial credit. In addition, there are credits allocated for part-time and full-time students (regardless of age). It is important to make sure that your institution provides you with a Form T2202A. For simplifying the return process, a tax software will be able to guide you with claiming all eligible credits on your return.
Now I must emphasize two things.
- You can be a working adult who can be considered a part-time or full-time student and can claim the credits. So check with your institution.
- Textbook costs also qualify towards this credit.
- Exceptions can be made by CRA if a T2202A form is not provided by your institution. As an example, if you are in a distance learning program with an institution outside of Canada AND it meets the criteria of qualifying education set forth by the CRA, then you can still claim tuition and textbook credits. Just remember to have your foreign institution provide you with an annual statement of accounts. You can always contact the CRA and have someone confirm if a certain foreign institution meets their criteria. Keep this in mind when selecting foreign institutions.
- Interest paid on qualifying student loans can be claimed as a credit on your return. Generally, interest paid from Line of Credit for tuition is not.
- In most instances, scholarship and grants received are tax-free.
Mistake #4 – Not claiming public transit credit
If you are a student (or for that matter anybody) and if you pay for a MONTHLY public transit pass in Canada then you can claim this cost as a credit on your return. Note that “one-off” purchase of transit tokens do not qualify for credit.
This list is compiled based on my discussions with a tax adviser at H&R Block Canada who has sponsored this blog post. The information provided here is a general list for information purposes. Taxes vary among individuals so always consult a tax professional for certainty. I invite you to visit hrbtaxtalk.ca to view tax queries posted by others or post your own question. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this bulletin can be accepted by H&R Block Canada, Inc. or Larkycanuck.com
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