This is the second post in a two-part series on tax tips for students and recent graduates. Check out 4 Tax Tips for Students and Recent Graduates for tips 1 to 4.
5. Claim Your Interest Paid on Student Loans At The Right Time
If you took out a federal or provincial student loan to help finance your education and are now paying it back, you can get a tax credit for the interest that you paid on the loan. You can claim your interest payments in the year you made them, or in any of the next five years. So, if you made a payment in 2012, you can claim a credit for that payment on any of your 2012 to 2017 tax returns.
You might not benefit from claiming your interest payments this year. This will most likely be the case if your income isn’t that high or you are able to claim several other credits and deductions this year. If you aren’t benefiting from claiming your interest this year, you should wait to claim your interest payments in another year. SimpleTax helps you figure out how much you should claim this year.
6. Special Rules for Claiming Child Care Expenses
The Income Tax Act allows people to claim a deduction for their child care expenses. The “allowable deduction” is increased for someone who is attending (or whose partner is attending) a full or part-time educational program.
If you were the only person supporting your child, were enrolled in an educational program, had high child care expenses, and had a relatively low income, you might benefit from this increased allowable deduction.
If there are two parents supporting your child, usually the parent with the lower net income must claim the deduction. However, if the parent with the lower net income was enrolled in an educational program, the parent with the higher net income can claim part of the deduction. If both parents were enrolled in educational programs, the parent with the higher net income can claim an even bigger part of the deduction, reducing the tax bill for your entire family.
Answer all of the questions in the child care expenses section in SimpleTax to make sure your family gets the maximum benefit!
7. Finance Your Education With the Lifelong Learning Plan
The Lifelong Learning Plan allows you to withdraw amounts from your RRSP on a tax-free basis to finance full-time training or education for you or your partner. You can withdraw up to $20,000 from your RRSP (with an annual limit of $10,000) to help finance your or your partner’s program. Note, however, that you must pay back these amounts within 10 years or they will become taxable.1
8. Don’t Miss Out On Provincial Tax Credits
- Ontario: If you pay rent or property tax, and/or you live in a designated student residence, you can apply for the Ontario Energy and Property Tax Credit.
- Saskatchewan: Recent graduates in Saskatchewan should apply for the Graduate Retention Program, which can be worth up to $20,000 over seven years.
- Manitoba: Manitoba has several credits that may be of interest to students:
Questions or Comments?
2 Updated January 18, 2017 I updated the post to fix broken links and to remove references to the Nova Scotia and New Brunswick graduate retention credits which have both been eliminated.