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When you’re in college, your expenses are probably the last
thing on your mind. Between classes, parties, and general college life, who has
time to worry about finances? But as soon as you graduate and enter the real
world of work and bills, things get a lot more serious. You not only have to
pay for necessities like rent and food, but also for student loan repayments
and other educational expenses. Luckily, there are various tax credits specifically
for students that can help reduce the burden of these costs. If you’re an
undergraduate or postgraduate student, these tax credits might come in handy
when it comes time to file your taxes this year. After all, every dollar counts
when you’re a broke student! Here are 10 tax credits for students that you
should know about before filling out your taxes this year.
Exclusion of Educational Benefits
If you’re in school and receiving any forms of educational
assistance, such as grants, scholarships, and loans, then you may be able to
exclude this from your income when filing your taxes. This means that the
amount you received from these sources does not have to be included in your
taxable income. This can significantly reduce the amount of money you owe the
government comes tax time. This can be extremely helpful if you received any
scholarships or grants to help you pay for school. After all, most scholarships
and grants do not have to be repaid, so you don’t have to worry about repaying
the government for them.
Qualified tuition program (QTP) exclusion
If you’re attending post-secondary school, you may be able
to receive a tax break by contributing to a qualified tuition program (QTP).
QTPs are special accounts set up by your state or the government that help
students repay their student loans. The money you contribute to your state’s
QTP will not be taxed, thus reducing the amount of money you owe at the end of
the year. Keep in mind that you cannot contribute to a QTP every year. You can
only contribute once during your lifetime, no matter how many years you’re in
school. You can also only contribute if you’re enrolled in a post-secondary
institution. If you’ve already contributed to a QTP during your lifetime, then
you cannot contribute to another QTP.
Lifetime Learning Credit
If you’ve never used the lifetime learning credit before,
you might want to consider it this tax season. The lifetime learning credit is
a credit you can use to reduce your income tax if you’ve paid for educational
expenses. The lifetime learning credit is different from the tuition and fees
deduction, which we’ll discuss later in the article. The amount of lifetime
learning credit you can receive depends on your income and family size. If
you’re married and file a joint return, your lifetime learning credit will be
half of what it would be on a single return. For example, if you’re married and
your income is $80,000, you can receive a lifetime learning credit of $2,000.
If you’re single, you can receive $1,000.
Tax-free Savings Account (TFSA) contribution
If you have a part-time job while you’re in school, you may
have to report this income when filing your taxes. However, you’ll be able to
avoid paying taxes on this money if you contribute it to a tax-free savings
account (TFSA). This way, you’ll have extra money later on when you start
repaying your student loans. You can contribute up to $6,000 to a TFSA every
year. If you make a full-time income and file taxes as a single person, you can
contribute $6,000 to a TFSA this tax season. If you make a full-time income and
file taxes as a head of household (with a dependent child), you can contribute
$7,000 to a TFSA this tax season. If you make a part-time income, you can still
contribute to a TFSA as long as your annual income is less than the maximum
annual income for the aforementioned groups.
Educator’s Assistance Program (EAP) exclusion
If you’re an undergraduate or postgraduate student and
receive a full-time salary while completing your degree, then you may be able
to exclude the EAP from your income. The EAP is a program that provides
financial assistance to students who are pursuing degrees in teaching. If you
receive a full-time salary from this program, you can exclude the amount you
received from your income when filing your taxes. This way, you don’t have to
pay taxes on this money.
Canada Education Savings Program (CESP) contribution
If you have some extra cash lying around, you might want to
consider contributing to the Canada Education Savings Program (CESP). The CESP
is a government program that helps parents and students save money for
post-secondary education. Any money you contribute to the CESP is tax-free.
This means that you won’t have to pay taxes on the money you contribute. If you
contribute to the CESP and you’re a single, full-time employee, you can receive
up to $500 from the government. If you contribute to the CESP and you’re a
single, part-time employee, you can receive up to $250 from the government.
Conclusion
When you’re in college, the last thing on your mind is
taxes. However, once you graduate and enter the real world, things get a lot
more serious. Not only do you have to pay for necessities like rent and food,
but you also have to pay taxes and repay your student loans. Luckily, there are
various tax credits specifically for students that can help reduce the burden
of these costs. If you’re an undergraduate or postgraduate student, these tax
credits might come in handy when it comes time to file your taxes this year.