Did you just enter college or university in Canada? Are you excited to embark on a new educational journey? While education can be a great investment, you should consider if you still need to pay income tax.
Perhaps you're wondering, "is a full-time student tax-exempt?" Some students are, but not all.
Keep reading to learn if you qualify as a full-time student and to learn "how much tax do I pay as a student?"
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Full-Time Student Status
When determining if a full-time student is tax-exempt, it's important to consider who qualifies as such. Multiple entities can determine if someone is a full-time student. In some cases, the university or college will have qualifications, such as the amount of courses or other requirements related to school.
The Canada Revenue Agency (CRA) defines a full-time student as someone who regularly attends a university, college or another educational institution at the post-secondary level. In this case, full-time attendance applies to students studying from September to April.
Other cases that qualify someone as a full-time student occur when a student enrolls in a qualifying educational program. If the student didn't have a full course load, they could still qualify if they attended part-time and were eligible for the Disability Tax Credit (DTC).
A student may also qualify as full-time if they attended part-time due to a mental or physical impairment. For these students to count as full-time, they must have a letter from their doctor certifying the condition.
What Is a Qualifying Educational Program?
Another part of determining a student's status is if they enroll in a qualifying educational program. Such programs must last at least three weeks with no weeks off during the term.
Each week, the student should have at least 10 hours of work or instruction, excluding study time. The program can occur at any educational institution, but the institution must meet certain requirements.
First, it can be a college or university in Canada, or it can be another educational institution in the country. If the college or university is outside of the country, the program must also be at least three weeks. However, it should also lead to a bachelor's degree or higher.
Certain institutions in the United States can also qualify if they give post-secondary courses. This applies to schools near the Canadian border where the student in question lives in Canada and commutes across the border to go to school.
What About Online Studies?
As technology becomes more common, many students may opt to earn a degree online. If a student wants to take online courses, the CRA only considers that student full-time if the program requires virtual attendance on a full-time basis.
The requirement can apply to classes and course-related activities, but online studies can't be optional. If a student takes online courses from a college outside of Canada, they won't be a full-time student if they only take courses by correspondence or electronic assignment submissions.
When Full-Time Students Pay Income Tax
Now that you understand if you qualify as a full-time student, you should consider if you will need to pay income taxes. The student tax rate isn't any different from the regular tax rate, though students do typically have a lower income.
You will need to pay income tax any time you work or receive any other income while you're in school. It doesn't matter if you're a full-time or part-time student.
And it doesn't matter if you earned a ton of money or not. Filing your taxes lets you claim a refund, and you can use your taxes to declare how much you spend on tuition during the year.
Consider a few situations where you have to pay income tax as a full-time student.
Working Part-Time
If you worked part-time during the school year, you will need to pay income tax on those earnings, and the amount can depend on how much you earn. Many students need or choose to work part-time to help pay for tuition and living expenses.
Even if you only work a few hours a week, you will need to pay income tax. You may be able to get a refund after filing your taxes, but your employer in Canada has to deduct income tax for you.
If you don't owe any income tax at the end of the year, you can get some of that money back. However, when you work for a company in Canada, they will take some of your money.
Working Summers
You may also need to pay income tax if you work during the summers and other school breaks. The same rules apply to students who work part-time throughout the year.
When you work for a Canadian employer, they have to take money from your pay cheque to account for the Canadian Pension Plan (CPP) and other benefits. Now, you will be able to enjoy these benefits later, but you have to pay your share when you work as a full-time student.
It doesn't matter if you work part-time or full-time during the summers. As long as you work, you will not be exempt from paying income tax.
Working for Yourself
Some full-time students may opt to work for themselves rather than to get a normal job. If you provide services such as babysitting or tutoring, that usually means you work for yourself.
You will need to pay your student income taxes, and you won't have an employer to deduct them for you. That means you will need to track your income throughout the year. Then, you can pay the CRA your tax balance when you file.
Even if you also work for an employer, you will need to manage any self-employed income. Being a full-time student won't exempt you from having to pay income taxes.
Getting Scholarships and Bursaries
If you get more than $500 in scholarships or bursaries, you will need to pay income tax on the amount over $500. After that threshold, you will need to report your income from scholarships on your tax return.
You can only receive this exemption if the scholarship is for your enrolment in a qualifying program. The scholarship also has to be for the duration of the program.
However, students in Quebec will need to report all of their income from scholarships and bursaries.
Fellowship Income
If you pursue a post-doctoral fellowship in Canada, that income will be taxable. You also can't receive the scholarship exemption because that only applies to programs that lead to a bachelor's, master's, or doctoral degree.
When Full-Time Students Don't Pay Income Tax
You may think that the answer is always "no" to the question "is a full-time student tax-exempt?" However, there is one case where a full-time student doesn't have to pay income tax.
If a full-time student doesn't work and doesn't receive a scholarship, bursary, or fellowship, they won't have to pay income tax.
This situation isn't the most common as many students work or have some financial assistance to pay for school. But it can still occur if a student has help from parents or other family members and doesn't need to work during school.
What About International Students?
If you're an international student in Canada, you have a lot of costs to think about. And if you work during your studies, you do still have to pay income tax like Canadian residents.
When you establish residential ties with Canada and live there for more than half of the year, you will be a resident for tax purposes. You don't have to be an official resident for immigration purposes.
Attending college full-time in Canada does count as establishing residential ties. Once you arrive in Canada to study, you will need to pay international student income taxes as if you were from the country.
Now, you will also have to pay taxes on any income you earn back home. Unfortunately, Canadian income tax applies worldwide.
How to File Your Income Tax in Canada
Whether you're a Canadian citizen or an international student, odds are you will have to file taxes. Fortunately, you have multiple options you can use to file your taxes and pay your income tax if your employer hasn't already deducted it.
Here are the steps to file taxes and pay income tax for students in Canada.
Have a Social Insurance Number (SIN)
If you're from Canada, you should already have a Social Insurance Number (SIN) that you can use to file your taxes. The number is nine digits, and the CRA will use that number to identify you for tax purposes and other benefits.
If you're an international student, you can apply for an SIN at the Service Canada location closest to you. You should have your study permit and passport when you go to apply.
You can also apply for an Individual Tax Number (ITN) if you can't get an SIN. You can apply for this online, but it can take a few weeks to get the number.
File Online
Once you have your SIN or ITN, you should organize any information slips you get from your school or employers. The slips will include information on how much money you earned from that source of income.
After you have everything you need, you can file your taxes on the CRA website, or you can use certified tax software such as TurboTax. The CRA has a program called NETFILE that you can use to do your own taxes and file them directly with the CRA.
If you can't or don't want to file your taxes online, the CRA also accepts them through the mail. You can still use a program like NETFILE, but you can print off the final tax return and mail it in.
You will need to mail it to a tax centre near you. Consider where you live or go to school to find the best location to submit your taxes.
When to File
The due date to file your taxes in Canada is April 30. If you don't file by that date, the CRA will charge you a penalty, and you will need to pay interest on what you owe.
Luckily, the income tax rate for students or anyone won't incur fees if you file your taxes before April. If possible, try to file your taxes as soon as you can. Then, you have plenty of time to go through your documents and make sure everything looks correct.
You should also ensure your address is correct so that the CRA can send important correspondence regarding your taxes. That way, you won't miss any essential updates.
After You File
If you use NETFILE to submit your taxes, it will give you a confirmation number. It can also tell you if it accepts your return for processing. The CRA may need to contact you to verify some of your information, so you should take note of their phone and email so that you can answer any messages promptly.
You will also get a notice of assessment (NOA) regardless of how you file your taxes. The notice will either come in the mail, or it will go to your email address if you register for email notifications.
You can also track your status using your online account. Then, you can determine when you will get your refund.
How to Avoid Tax Scams
As a student, you don't have much experience with paying income taxes. Since this may be your first time, you should be extra careful to avoid scams.
Don't click on any links in emails from the CRA because they won't include links. You should also avoid giving personal information through emails and text messages.
Is a Full-Time Student Tax-Exempt?
Whether you're in your first year of university or you're a new international student, you may wonder, "is a full-time student tax-exempt?" Unfortunately, very few full-time students are exempt, and those who are don't work or have scholarships.
Even if you work part-time or you get scholarships to pay for school, you will need to pay income tax. Fortunately, paying income tax isn't hard, and the CRA makes it easy to file your taxes.
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