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[H&R Block Insight - September 2009]
[Students learning to stretch their budgets]

With the cost of a post-secondary education rising, students are becoming much more careful when spending their money. There is a good reason to be budget conscious. According to a recent poll by RBC and Ipsos Reid on student finances, half of all Canadian post-secondary students said they expect their bank accounts to be empty before the end of the school year.

Add in a tight employment market and students are facing a financial crunch. The poll showed that 79 percent of students planned to work part-time while in school and use that money to pay bills.

Students who work throughout the year can usually expect some good news at tax time since there are a number of credits they can qualify to claim. However, students who are relying on a big tax return to pay all their bills in March or April may be in for a surprise.

The basic personal amount for 2009 - the amount you can earn before you have to pay any taxes - is $10,320. If you earn less than this amount, you do not have to pay any income tax and it may not be withheld from your paycheque.

For example, if you only work for a couple of months during the summer and earned $8,000, you do not have to pay income tax. But if you don't earn enough income to pay tax, you cannot claim many of the non-refundable student credits. The credits are meant to help reduce your income and your tax refund is actually money you had withheld on your paycheque. If there is no money withheld, there is nothing to refund.

But the positive news would be the ability to carry forward some of your non-refundable tax credits to when you are earning more than the minimum. Any tuition credits you don't use on a tax return can be used in other years when you have more income to help reduce your tax payable. So even if you don't earn enough money to pay income taxes, it is important to file your return and carry your credits forward.

So if you are budgeting for your tax refund to pay off your credit card in April, make sure you understand how much income you earned, how much tax you have paid and if you can expect a refund.

 

[Letter to the Editor]

Hello,
I am currently taking kickboxing classes and was told to hang on to my receipts so I can claim the adult physical activity credit on my income tax. I am a stay-at-home mom so I don't have any income but can I still claim these receipts or can my husband claim them? I know he claims our children's physical activity receipts.

Thanks,
Tanya T

Tanya,

Thank you for your question. Since you live in Nova Scotia, you should be able to take advantage of the Healthy Living tax credit. It is similar to the Federal Government's Children's Fitness tax credit but it allows adults to claim a tax credit for physical activity as well as children.

The tax credit was effective for the 2009 tax year but recent government changes mean there are a few questions around the credit that are unanswered. First, the previous Conservative government announced in its May 2009 budget that this tax credit was being deferred. This government was defeated the same day.

Now the New Democrats are governing and they have yet to announce a budget, which means the future of this credit is unknown.

I suggest that you still keep your receipts just in case there is a late announcement, which makes this credit available for 2009. As far as who will claim the credit, it will depend on how the government writes the legislation.

 

[Back to school triggers extra-curricular activities…]

Parents can get a little tax credit for their active children. The Children's Fitness Credit is a non-refundable credit and allows parents to claim a maximum of $500 paid towards an eligible program. The cost covers registration for each child under the age of 16. Children with disabilities are eligible for an additional $500 credit up to the age of 18. Remember to keep your receipts.