Calculating Your Taxes
Calculating taxes can be rather daunting at first, but it doesn’t have to be. Filing your own taxes can be an empowering experience and a great way to develop your financial independence.
If you are interested to learning how to file your own taxes, we offer Do It Yourself Tax Clinics throughout the month of March. During these sessions, students and alumni learn how to file their taxes online.
Tax deductions are viewed as more valuable because they can generate bigger savings. Deductions are subtracted directly from your taxable income. You do not have to multiply this deduction by a percentage. For example, if you earned $20,000 and made a $1,000 RRSP deduction, your taxable income would be reduced to $19,000 (you will be taxed for this amount only) . Students typically miss out on claiming eligible moving expenses which are considered deductions.
Most tax credits are non-refundable, which means that they can’t generate a tax refund on their own. You need to owe income tax during the year in order to gain the tax return benefit. Unfortunately, you also have to multiply them by 15% before you apply them to the tax owing. For instance, if you claim $5,000 in tax credits, you will receive a return of $750 from the tax that you have already paid. These tax credits are contained on Schedule 1 of the T1 return.
Some credits can be carried forward until you are eligible to use them! To claim these credits and carry them forward, you must file a tax return even if you are not generating an income. When you are earning an income and paying taxes you can then recoup those tax credits.
Examples of expenses that can be carried forward include:
- Public Transit amounts include your bus pass supplementary fee and any other public transit cost for the entire academic year. A receipt can be printed from your McMaster student account at tax time.
- Disability Amount deduction is available for persons suffering prolonged mental and physical impairments. To qualify, there must be adequate documentation from a doctor (T). For more information visit the CRA website.
- Student loan interest includes loans received under the Canada Student Loans Act, or the Canada Student Financial Assistance Act. This does not include interest from a student line of credit. Only you can claim this deduction. If you do not have enough taxable income to utilize the credit, do not claim it that year; instead, carry it forward and use it to reduce your taxes in the future. The time limit is 5 years.
- Tuition amounts can be transferred to spouse/partner, parents, and grandparents if you do not need them and do not want to carry them forward. There is a $5,000 limit on the amount that you can transfer. The difference should always be carried over. Note: Eligible tuition fees do not include student association fees, transportation and parking, meals and lodging and the cost of books.