If you’re still in school, you may not yet be earning enough to pay income tax. So, no reason to file a tax return, right?
Wrong. By not filing a tax return, you may be walking away from free money in the form of tax refunds and credits, says accountant Allan Fefergrad of Better Tax Services in Montreal. And, as he wrote for the popular blog, Financial Highway: “The government will not come knocking at your door to tell you that if you file your taxes you are entitled to get this money back.”
Still not sure you want to bother filing? Then, consider the following five good reasons:
1. Tax refund
Every Canadian has a personal tax exemption amount (for 2012, it’s $10,822). That means you don’t pay tax on any earnings equal to or less than this amount. But if you worked during the year, your employer may still have deducted federal and provincial income taxes from your pay. If so, then you’re eligible to get some or all of it back. (Note: scholarships are tax exempt – you don’t even have to note them on your tax return.)
2. Tax credits
Canada’s Tuition Tax Credit lets you claim the cost of your tuition on your tax return. You can also claim an education amount equal to $400 for each month you’re enrolled full-time or $120 for each month you’re enrolled part-time and a textbook amount of up to $65 a month for full-time students, $20 a month for part-time students. If you don’t have enough income to claim these deductions, then you can carry the credits forward to future years when you’re earning more. Or, provided your own tax has been reduced to zero, you can transfer the credits to a parent, grandparent, spouse or common-law partner.
3. Student loans
You can claim interest on qualifying student loans, such as those made to you under the Canada Student Loans Act or the Canada Student Financial Assistance Act. If you don’t use the credit, you can carry it forward for five years. You can’t transfer it to anyone else.
4. GST/HST credit
Even if you didn’t have a job during the school year, you may be eligible for the GST/HST credit program aimed at helping low- and modest-income Canadians handle the added cost of the tax on goods and services. It’s a credit that’s paid out four times a year. If you don’t file your taxes, though, you won’t be eligible. (Note: you have to be 19 or over to qualify for this one.)
5. RRSP contribution room
Sure, saving for retirement may be the last thing on your mind right now. But by filing a tax return you are building up RRSP contribution room that you can carry forward to claim during future years of higher income.
Finally ready to file your tax return? Good – but before you get to work, make sure you have these key items handy:
- The official tax slip from your school (T2202A): It shows you’re a student and the amount of tuition you paid. If you don’t plan to claim the tuition tax credit this year, then hang on to these slips so you can use them in the future.
- Your social insurance number (SIN): You can’t file a tax return without a SIN number. If you don’t have one, you can apply through Service Canada.
Remember, the deadline for Canadians to file their tax returns is April 30.
|Are you on track to meet your financial and retirement planning goals?|
|Having a plan to protect your family and build your savings now can help ensure you will have enough money to last through retirement. Ask your advisor about Sun Life Financial Money for Life.™ Don’t have an advisor? Visit Sun Life Financial Advisor Match to help you find one in your area.|
Get monthly tips and tools to help you plan a brighter financial future.
To receive recommended reads about money, health and family, sign up for the FREE monthly Brighter Life newsletter.