Whether or not you have most, or part, of your tuition covered, expenses and bills still have the tendency to pile up. However, if you are a medical student with little or no income there are specific deductions and options available to you.
“Like what?” We knew you’d ask!
While you may not need to file an income tax return, it still may be worth doing. You may qualify for a GST/HST credit, a quarterly payment for those with low or modest incomes, and more. You’ll also be able to carry forward certain other tax credits into future years and use them to reduce your taxable income then.
Here are some tax deductions and credits you might have that would reduce the amount of tax you pay, either now or in future:
Tuition tax credits
Apart from tuition fees themselves, you may also be able to claim fees paid for:
- Use of the library or laboratory facilities,
- Mandatory computer service fees,
- Some exam fees may also qualify,
- According to the Medical Council of Canada website, Qualifying Examination Parts I and II exam fees are eligible.
- Certain related fees, such as late fees (up to a maximum total of $250) are also eligible.
To claim the tuition fees, you must obtain one of the following forms from your educational institution:
- Form T2202 – Tuition and Enrolment Certificate
- Form TL11A – Tuition and Enrolment Certificate – University Outside Canada
- Form TL11C – Tuition and Enrolment Certificate – Commuter to the United States
- Form TL11D – Tuition Fees Certificate – Educational Institutions Outside Canada for a Deemed Resident of Canada
Tax Tip: If you are unable to use all your tuition fees in the current year (maybe you haven’t earned enough income), you can transfer them to an eligible person, such as your spouse or common-law partner or, under certain restrictions, a parent or grandparent, or carry them forward.
Interest on student loans
If you have a student loan from the government – whether it is a loan under the Canada Student Loans Act, the Canada Student Financial Assistance Act or a similar provincial or territorial loans program – be sure you claim the 15% federal non-refundable tax credit for interest paid on your student loans.
However, you may have noticed that your interest payments were likely lower than usual in 2020. That’s because the federal government put a pause on repayment schedules from March 30 until September 30, so no interest accrued during this period on the federal portion of Canada Student Loans.
Note that interest paid on a personal loan or line of credit doesn’t qualify for the tuition tax credit.
Tax Tip: If you have no taxes payable for this year, do not claim the interest paid on your current tax return. Instead, claim it on any of your tax returns in the next five years.
Relocated for school? Well, if you moved at least 40 kilometres for a full-time post-secondary school in the past tax year, you may be able to deduct allowable moving expenses against taxable scholarship or grant income.
Moving expenses can include things such as:
- Transportation and storage costs,
- Travel expenses,
- Temporary living expenses (hotel and/or Airbnb),
- The cost of cancelling a lease, and
- Various other moving-related costs.
If you have moving expenses that you can’t deduct in the current year because you haven’t earned enough income, you may be able to carry them forward to another tax year – just be sure to keep your receipts!
Tax Tip: If you have sold and/or purchased a home because of your move, you may be able to claim any advertising (on any websites, etc.), notary or legal fees, real estate commission, property transfer taxes, and other registration costs.
If you incurred any medical expenses (including dental and eye care expenses) that aren’t covered by an insurance plan, you may be able to apply them against your taxable income. For 2020, there are both federal and provincial non-refundable tax credits on qualifying medical expenses in excess of either $2,397 or 3% of your net income, whichever is less.
Tax Tip: Be careful if you have significant tuition tax credits that you are carrying forward from prior years. You must use those tuition tax credits to reduce your taxable income before you use any medical expenses, or you will lose the amount of credits you could have deducted.
First-time homebuyers’ amount
If you were able to buy your first home, you might be able to claim a federal non-refundable first-time homebuyers’ tax credit equal to 15% of up to $5,000 in the year of purchase.
This can result in tax savings of up to $750.
For those students with existing RRSPs, you are also allowed to draw from your RRSPs for the purchase of buying a home or to finance your education. Certain restrictions apply and repayments over the following years are required, for more information on any of these programs reach out to us.
Tax Tip: To qualify as a first-time homebuyer, you and your spouse (or common-law partner) must not have owned or lived in another home owned by either of you in the current or four preceding calendar years. It is also important that you make said new home your principal residence within the first year of purchase.
If you have children, the cost of daycare, babysitters and full-time caregivers is deductible, to a maximum of $8,000 a year for children under 7, and $5,000 a year for kids aged 7 to 16.
Of course, you or your partner would need to have an income to deduct child-care expenses, which can’t be carried forward to another year.
Tax Tip: As long as total child-care expenses do not exceed the defined limits per child multiplied by the number of children, eligible child-care expenses are generally allowed. To maximize your base for child-care deductions, make sure to report on your tax return all your children who are 16 years and under, and any with infirmities.
KBH is proud to offer free basic personal income tax returns for medical students. Reach out to us today to learn more!