Are you a medical student with little or no income?
You may not need to file an income tax return, but did you know that it’s still worth doing? You may qualify for the GST/HST credit, a quarterly payment to people with low or modest incomes. 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 tax credits you might have that would reduce the amount of tax you pay, either now or in future.
1. Tuition tax credits
With medical school tuition fees reaching thousands of dollars a year, the tuition tax credit is a valuable one. Apart from tuition fees themselves, you may also be able to claim fees paid for admission, application, use of library or laboratory facilities, diplomas, and mandatory computer service fees.
Exam fees may also qualify for the tuition tax credit. According to the MCC website, the Medical Council of Canada Qualifying Examination Parts I and II exam fees are eligible. Certain related fees, such as centre change request fees or 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
Tip: If you can’t use all your tuition fees in the current year because 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 to a future year.
2. Interest on student loans
Do you have a student loan from the government? This could be a loan under the Canada Student Loans Act, the Canada Student Financial Assistance Act or a similar provincial or territorial loans program.
Make sure you claim the 15% federal non-refundable tax credit for interest paid on your student loans. Of course, 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.
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. Unlike other tax credits, such as the tuition tax credits, CRA does not keep track of the carry forward amounts for you.
3. Moving expenses
If you moved at least 40 kilometres for 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 like transportation and storage costs, travel expenses, temporary living expenses, 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. Keep your receipts in case the CRA asks for them.
Tip: If you have sold and/or purchased a home due to your move, you may be able to claim advertising, notary or legal fees, real estate commission, property transfer taxes, and other registration costs.
4. Medical expenses
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, you can claim a 15% federal non-refundable tax credit on qualifying medical expenses in excess of either $2,397 or 3% of your net income, whichever is less.
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 any medical expenses, or you will lose the amount of credits you could have deducted.
5. 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 a tax savings of up to $750.
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. You also must make the new home your principal residence within one year of purchase.
6. Child-care expenses
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 age 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. Generally speaking, the lower-income spouse or common-law partner must claim this deduction (unless that person is at school or disabled or the two of you are separated).
Tip: In practice, the CRA generally does not attach specific child-care expenses to specific children. That is, as long as total child-care expenses do not exceed the defined limits per child multiplied by the number of children, all 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.
If you are a medical student with a basic tax return, you can get your income tax return done for free through the accounting firm MNP.
The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice, nor is it intended to replace the advice of independent tax, accounting or legal professionals.