Tax on Canadian TA - What do I expect?

[anonyouknow]

Hello all

I've received a TAship worth approximately 16,000-17,000 per year, and have been told "TAships are taxed – in a ratio of 2/3 salary (taxed) and 1/3 scholarship (not taxed)."

I'll be coming in as an international student and I'm not sure how much I should expect to be taken out of this amount for taxes. Can anyone who has received a Canadian TAship shed some light on what percentage is usually removed for taxes?

[ktel]

Yuck taxes. So glad my dad is an accountant and deals with this stuff for me. First of all you should get reading:

http://www.cra-arc.gc.ca/tx/ndvdls/sgmnts/stdnts/menu-eng.html

http://www.cra-arc.gc.ca/tx/nnrsdnts/menu-eng.html

http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/stdnts-eng.html

http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html

You will be in a LOW tax bracket, but you will still have to pay 15% federal tax and provincial tax which varies based on province and income level. Expect to be paying 20-25% in taxes. Now I'm not sure exactly how it works for international students, but I have to pay into a pension plan and employment insurance. Not sure if you will. You can typically deduct your tuition, text books, moving expenses and a few other expenses, so you might get money back.

[anonyouknow]

Yuck taxes. So glad my dad is an accountant and deals with this stuff for me. First of all you should get reading: http://www.cra-arc.gc.ca/tx/ndvdls/sgmnts/stdnts/menu-eng.html http://www.cra-arc.gc.ca/tx/nnrsdnts/menu-eng.html http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/stdnts-eng.html http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html You will be in a LOW tax bracket, but you will still have to pay 15% federal tax and provincial tax which varies based on province and income level. Expect to be paying 20-25% in taxes. Now I'm not sure exactly how it works for international students, but I have to pay into a pension plan and employment insurance. Not sure if you will. You can typically deduct your tuition, text books, moving expenses and a few other expenses, so you might get money back.

Thank you SO MUCH for the fast and detailed reply. I'll get to reading now Yikes, that is a pretty hefty sum in taxes, especially since grad students aren't typically rolling in money!

[Frozenroses]

Hey Ktel - I know I am being a bit slow on the uptake here... but I don't fully get it. I understand that say, if I go to school in Alberta, I will be paying 25% tax on my TAship (10% provincial, 15% fed - or whatever). So how does it work for scholarships? Say my school has offered me 20,000 per year in scholarships, and 10K a year in TAships. Logic to me dictates that I will therefore receive 7.5K from the TAships, but then am I taxed on the scholarship fully or partly? If I hypothetically say my fees are 6K per year, what would I get to keep and what goes to the big bad wolf? (any further guidance would be really really appreciated - I am such an arts-only student sometimes... gah taxes)

[Andsowego]

Hey Ktel - I know I am being a bit slow on the uptake here... but I don't fully get it. I understand that say, if I go to school in Alberta, I will be paying 25% tax on my TAship (10% provincial, 15% fed - or whatever). So how does it work for scholarships? Say my school has offered me 20,000 per year in scholarships, and 10K a year in TAships. Logic to me dictates that I will therefore receive 7.5K from the TAships, but then am I taxed on the scholarship fully or partly? If I hypothetically say my fees are 6K per year, what would I get to keep and what goes to the big bad wolf? (any further guidance would be really really appreciated - I am such an arts-only student sometimes... gah taxes)

Contrary to urban legend, scholarships in Canada ARE considered income and are taxed accordingly: http://www.cra-arc.g...s/menu-eng.html

Don't worry though, you're likely going to be in such a low tax bracket, that you'll get a lot of the tax (if not all of it) back as a refund when you file. To use myself as an example: I've completed two Bachelor's degrees, a Master's and now I'm in the 3rd year of a PhD (all done in Canada), and I've NEVER had a year where I didn't get a refund or break even with my taxes as a full-time student.

Edited February 25, 2012 by Andsowego

[ktel]

I have never EVER been taxed for any of my scholarships, undergraduate or graduate.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/130/schlrshp-eng.html

This may be a bit confusing to decipher. Hence why I post another simpler link that explains:

http://www.taxtips.ca/filing/students/scholarships.htm

And as Andsowego said, you will be in such a low tax bracket that you will probably get all your taxes back anyways.

[TakeruK]

I haven't found anything that says, when it comes to Educational Tax Credits, that International students are treated differently than Canadian citizens.

Income from RAships and TAships are considered normal income, as if you worked at McDonalds or something and that is fully taxable. You get a "T4" tax slip for these sources of income.

Income from Scholarships, Fellowships, or other Awards are no longer considered taxable income (as of tax year 2010), as long as certain requirements are met -- most importantly: you are considered a full time student. For these sources of income, you get a "T4A" tax slip. Source for this information: http://www.cra-arc.gc.ca/E/pub/tg/p105/p105-e.html#P120_8332, which says: "The total amount of the award that is received by you as a student with respect to your enrolment in a program that entitles you to claim the full-time education amount qualifies for the scholarship exemption and is not reported as income on your tax return." If you are a part time student, then, basically, only the portion of the award equal to your tuition + $500 is tax free.

In addition, you are also allowed the following tax credits (from my 2010 tax return):

(also see source: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/323/dctn-eng.html)

$1 of tax credit for every $1 you pay in tuition.

$400/month of tax credit for "living expenses" for every month you are registered as a full time student (some smaller amount if part time)

$65/month of tax credit for "textbooks" for every month you are registered as a full time student ($20 if part time)

$1 of tax credit for every $1 you pay in public transit passes (only if you buy monthly passes or through your student fees)

You also get tax credit for moving expenses, but this is complicated to quantify.

And, everyone gets about $9800 of tax free income as a basic exemption.

So, lets say you pay $5000 in tuition and fees, and your program is 12 months full time, you will get $5000 + 12*$400 + 12*$65 + $9800 = 20380 of tax credits. This means that unless you make more than $20380, you won't pay ANY tax. You may actually qualify for other tax credits as well. And, the education tax credits (i.e. all of the above except for the $9800 basic exemption) are non-refundable credits (i.e. if you make less than this, you don't get money back) BUT they will carry over to future years (so if you graduate and end up working in Canada, it's extra tax credits for you!). In addition, you may transfer up to $5000 in educational tax credit to a spouse or parent who is making enough money to have to pay taxes.

Note: These numbers are for the FEDERAL taxes only. You also have to pay PROVINCIAL taxes, but they are calculated separately, with their own tax credit system etc. It's basically a repeat of what you do for federal taxes with slightly different numbers (for example in Ontario you get $481/month for living expenses instead of $400) but the end result is the same!

For most students, we never make enough money to have to pay tax and we graduate with a hefty amount of tax credits

All this is assuming that international students get the same credits but there's nothing I've seen that says otherwise.

[Frozenroses]

quite possibly the fastest, most indepth and helpful thread - thank you so much all!

[Andsowego]

Bottom line: All scholarships must be reported on your annual tax return. How much you are actually taxed (or if at all), and/or if you qualify for the scholarship exemption will be determined accordingly based on which province you're located in. http://www.cra-arc.gc.ca/E/pub/tg/p105/p105-11e.pdf

[Blurry]

Just be glad you're not in Quebec

If it makes you feel better I've made roughly 12 000 income in Quebec and received every tax dollar taken back with unused tuition amounts which I have deferred to later years. You will not be paying all that much tax if you also pay tuition. You can also claim your bus passes, a portion of your rent (your landlord gives you a slip each year for the amount you can claim), etc. With a good account, I don't think you will find yourself paying much.

PLEASE ALSO NOTE that your first 10 000$ income is TAX-FREE, so you will only be paying tax on your non-scholarship income above this amount (I'm not sure if this amount differs by province).

Edited February 25, 2012 by Blurry

[ktel]

This thread is fantastic. I'm only mildly knowledgeable when it comes to taxes. TakeruK, your summary is incredibly helpful, thank you!

And regarding scholarships, I was not trying to imply that you don't have to report scholarships on your tax forms. Just that they are exempt from tax if you are a full time student.

[TakeruK]

It turns out that non-residents *may* be treated differently. Non-residents who have less than 90% of their worldwide income coming from Canadian sources (e.g. this is likely to be true for the 2012 tax year since you are only in Canada for sept - dec, if you are starting this fall) are NOT eligible for any of the above tax credits!

Also the basic exemption will be ~10800 for the 2012 tax year.

[electrochoc]

As a student on a student visa you will be considered a temporary resident and you can still file taxes from within Canada with your temporary SIN. I'd advise you to do that as those tuition credits will come in handy in the future (especially if you decide to stay in canada after graduating). Plus you may be eligible for GST/HST credits. When I was an international student in the past (prior to getting my PR) I always made sure to file my taxes here and not in my country of origin. It works out really well (especially since the university may deduct taxes at the source and you might get a refund from them because of the personal and tuition credit amounts).