Depending on your student visa, you may be eligible to work on or off-campus part-time during the school year. In Canada, if you are entitled to claim tax credits, you can earn up to a certain amount without paying tax. In 2020, this was $12,069. If you earn more than the tax-free threshold you must pay tax on your income- this amount will be automatically deducted with each paycheck. If you earned income during the previous year it’s important to file a tax return. Not only is it required by law and can result in fines if not completed, but you may also receive a refund; the average Canadian tax refund a Taxback.com customer receives is $998.
The first step is to determine your residency status so you know how you will be taxed. For tax purposes, international students will fit into one of four categories that are based on your residential ties:
- Deemed resident
- Deemed non-resident
As mentioned prior, your residential ties to Canada will determine which of the four options you fit into. Ties may include a Canadian drivers license, a home in Canada, a Canadian bank account or credit card, health insurance with a Canadian province or territory, social ties in Canada, or a dependent. What classifies you as a resident, non-resident, Deemed resident of Canada and Deemed non-resident of Canada? This will help!
Resident and Non-Resident Status
Residency is determined on a case by case basis and the CRA will look at multiple different factors. First you need to satisfy the 183 day rule, following that the CRA will look at your significant residential ties to Canada (both primary and secondary). You need to satisfy a mixture of both.
Deemed resident and Deemed non-resident
If you have not established significant ties to Canada but have stayed in Canada for 183 days or more during the calendar year and are not considered a resident of your home country when it comes to tax treaty terms between that country and Canada, you are likely a Deemed resident of Canada. You might be considered a deemed non-resident for tax purposes if you are considered a resident of another country with which Canada has a tax treaty, and have established significant residential ties with Canada.
Since many international students do have one or many of these ties, you can get more information on determining your residency right online to determine your status.You can also count on a tax professional, like Taxback.com, to assist you with determining your residency status.
Do I have to file a tax return in Canada as an International Student?
International students who have lived in Canada, for even part of the year, likely need to file a tax return. If you meet any of the below items, you should file a tax return for the current year:
- You would like to claim a refund
- You have to pay tax for the year
- You would like to get benefit and credit payments
Didn’t receive income in the year? You might still want to file a tax return. Doing so allows the CRA to determine if you are eligible for:
- The goods and services tax/harmonized sales tax (GST/HST) credit
- Receiving the Canada child benefit
- Other benefits from certain related provincial or territorial related programs
Not filing a tax return when needed could mean fines and penalties from the CRA, along with any future visa you apply for being at risk as you will be flagged because of your tax history.
Even if you don’t work in Canada or if you don’t have any taxes owing, you can still carry your tuition tax credit forward to the following year to reduce your tax bill. It is also possible to transfer this credit to certain relations if unused by the student.
How do I file my tax return?
You will need a variety of documents to file your tax return in Canada. To get started on your tax return and claim your tax back you will need:
Government Forms: Your T4 or final payslip and complete all relevant income and tax forms, such as the T1 (Income Tax and Benefit Return form).
Your Payslips: To set aside your final payslip from each job so they will be ready to go when you file.
Work-Related Expenses: Keep your receipts during the year for any eligible expenses and have them on hand when filing.
When it comes to completing your tax returns you have the following options:
- File your return yourself with help from our tax section and the Government of Canada’s guidance.
- Consult a tax professional like Taxback.com for assistance from start to finish. In the event that you have lost your documents they can often help you retrieve what you need.
Can I claim expenses in my return?
If you earned more than the tax free allowance, you may be able to claim on the cost of certain expenses to reduce your overall tax liability. Expense examples may include:
- Working from Home Costs
If you plan to claim expenses on your tax return it’s important to keep a receipt for any expenses you plan to claim back - for example a medical bill.
Do I need to report my foreign income?
Yes, non-residents must declare their net income earned outside of Canada on their tax return in order to avail of the non-refundable tax credits in Canada.
There is a 90% rule that comes in which states if you earned more than 10% (net) of your income outside Canada, you can't avail of the tax credits. However, if you earned 90% or more of the income within Canada, then you can claim the credits.
It is important that your TD1 form is accurately completed when you begin your employment in Canada so you can obtain your tax credits. Claiming tax credits when you are not entitled to them could mean being faced with a tax liability at the end of the tax year.
If you need help you can trust when it comes to your tax returns, we have partnered with Taxback.com as a recommended service you can purchase. Learn more about the services Taxback.com offers and how they can assist you. Get tax help: