Tax filing for children and students 2019

February 8, 2019 Michelle Seymour

 

Tax filing for children and students 2019
 
Tax season is just around the corner with CRA’s EFILE service opening on February 18, 2019 for 2018 personal income tax returns. Consider our tax suggestions for students this tax season.
 

Have your child file a tax return

If your child is earning income from a part-time or summer job, help them file a tax return.

Due to the basic personal amount, individuals in Alberta could earn up to $11,809 tax-free in 2018. While this level of income can be earned without paying taxes, filing a tax return from an early age allows a child to begin building RRSP contribution room for the future.

Consider an example where a teenager earns just $50 a week babysitting throughout junior high and high school. By reporting this income, $468 of RRSP contribution room would accumulate each year. For students with higher earnings, the potential for future tax-deferred savings increases accordingly.

If you prepare the tax return with your child, another potential benefit is the opportunity to teach your child a financial life skill.

Tax considerations for post-secondary students

Finances are often tight for students so it’s worthwhile to take advantage of all tax credits, deductions and sources of education funding that may be available.

Claim the federal and Alberta tuition tax credit as well as the Alberta education tax credit (note that the federal education and textbook credits have been eliminated). If you can’t utilize the tax credits for the 2018 tax year, you can carry the amount forward to be used in a future year or transfer up to $5,000 to your parent, spouse or common-law partner.

If you moved away from home to attend school in 2018, claiming your moving expenses may result in tax savings. Moving expenses cannot be carried forward so this will only be of benefit to students with sufficient 2018 income.

If you will continue your studies in 2019, consider your options for education funding. These may include savings, income from a part-time or summer job, scholarships or student loans. Savings may include funds in an existing Registered Education Savings Plan (RESP) or Registered Retirement Savings Plan (RRSP).

If you are the beneficiary of an RESP, a common strategy is to maximize withdrawals from the RESP once you begin post-secondary education in a qualifying educational program. The intention of this strategy is to ensure you access the grants and bonds that are available in the RESP as well as the investment earnings in a tax-efficient manner. To learn more on RESP withdrawal planning and other RESP topics, please refer to our RESP Guide.

Another option for students with RRSPs is a tax-free withdrawal from your RRSP under the Lifelong Learning Plan. You can withdraw up to $10,000 per year to a maximum of $20,000 over four years. Any amounts withdrawn must be repaid.

 


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