A Guide to Taxes and Tax Refunds for Canadian Students

Whether you’re going to school and living at home, are at university or college, or are about to start living on your own, it’s important to understand the best ways to minimize how much you pay in taxes and how you can maximize your tax refund. Even if you have little income, there are tax credits, deduction, and benefits you can take advantage of.

If you’re looking for ways to save money come tax season, read this tax guide for Canadian students.

students at university

How to Estimate Your Tax Refund

The best way to get an estimate about how much you can expect back on your taxes is to identify your income, tax bracket, and deductions you can make. If you’d like to get a quick estimate, use an income tax calculator.

 

What Tax Bracket Does Your Income Fall Into?

Your income will fall into one of four tax brackets. The higher your income, the more taxes you pay. The Federal Tax Rates for 2022 are as follows:

  • A tax rate of 15% is taxed on total earnings up to $50,197
  • A tax rate of 20.5% is taxed on total earnings between $50,197 and $100,392
  • A tax rate of 26% is taxed on total earnings between $100,392 up to $155,625
  • A tax rate of 29% is taxed on total earnings between $155,625 up to $221,708
  • And a tax rate of 33% is taxed on total earnings over $221,708

Provincial tax rates are calculated the same way as federal tax (except for Quebec).

 

Identifying Credits and Deductions

Canada’s tax laws change all the time, which means the kind of tax credits and deductions you can take advantage of change often too. Deductions help reduce the amount of your income, which is what you get taxed on. Tax credits, like tuition fees, get applied directly to your tax payable.

 

How Can Students Spend Their Tax Refund?

If your tax credits are greater than your tax payable, you do not pay any tax. Any tax withheld during the year, will be given to you as a tax refund! The big question now is, what can you do with that money? There are a number of things you can do with it that will help you out financially in the long run.

 

Pay Off Student Loans and Any Other Debt

Paying down your student loan or any other debt may not sound like fun, but if you have debt with high interest, using your tax refund to reduce your debt could save you tens of thousands of dollars in interest expenses over the long run. The quicker you pay that debt off, the sooner you’ll have disposable income.

 

Open a Tax-Free Savings Account (TFSA)

Opening a TFSA is an excellent way to generate tax-free money. Unfortunately, more than half of all Canadians do not have a TFSA. That’s a lot of people missing out on an amazing investment vehicle.

Not only is the money you put into a TFSA tax-free, so is the money you make in the TFSA. Even when you withdraw it! The contribution limit for 2020 and 2021 is $6,000. You can make contributions to your TFSA either in a lump sum or periodically throughout the year. Which is great for Canadian students that get a tax refund and suddenly find themselves a little richer.

 

FastnEasyTax.com, Helping Students Minimize Their Taxes

If you’re a Canadian student and want to minimize your taxable income and maximize your annual refund, contact the personal income tax experts at FastnEasyTax.com

Since 2011, tens of thousands of Canadians have turned to FastnEasyTax.com for a convenient, fast, and affordable way to file their personal income tax. Certified by the CRA, we offer a variety of different products: a web application that allows you to submit your tax return online, without the need to download any software and a mobile app (eFile Canadian Tax Return) for all mobile platforms (Android, Apple, and Windows).

Our tax programs are easy to understand, the platforms are easy to use, and our customers get their tax refund back within 10 days. If you’re having difficulties, reach out to use, we’re happy to help our customers in any way possible and take pride in responding to all support questions within 24 hours.

To learn more about how fastneasytax.com can help simplify your personal income tax process, contact us today.