Humongous Provincial Tax Credits for Student Graduates

Know any recent graduates who can use special income tax breaks worth up to $25,000?

Publisher CCH's tax newsletter for December describes these significant tax incentives for student graduates in Tax incentives for Post-secondary graduates. The article gives more detail, and links to each province's program, but here are some key points:

• applies to any college or university graduate
• takes form of tax credit or rebate of provincial income tax, so you must live in the province
• are Not tied to graduates who are originally from that province or who attended school there (not necessarily even in Canada), i.e. they are designed to entice recent graduates to live and work in a province ... call it the "brain scoop by tax" strategy
  
• pay out over several years
  
• for year 2000 graduates onwards, varying by province
• Only in Saskatchewan (up to $20,000), Manitoba ($25k max), New Brunswick ($20k max), Nova Scotia ($15k max), Quebec ($8k max)
• claim is not necessarily made (e.g. not in N.B.) through the normal income tax return; it varies by province, so graduates need to check, and perhaps apply separately, to be sure to get it. It's a good check item to add to my review list, for provinces like N.S., where the claim is made on the tax return, when I do my annual online tax software ratings.
  

Thanks to CCH for the lovely pre-Christmas gift of valuable information.

Tax Credit for Student Loans

In the process of helping some students in my family with their finances, I came across the fact that certain types of student loans benefit from a tax break on the loan interest.

The benefit is in the form of a tax credit, meaning that it is a straight reduction of tax. Other key features and conditions (see CRA's page on tax matters for students) include:

• the credit is non-refundable, meaning that if the student has no tax to pay before applying the credit, the credit is not refunded and the credit goes to waste; in other words, apply for the credit only when there is tax to pay.
• the credit does not have to be used in the same year as the interest on the loan was paid, it can be carried forward and used up to five years later
• the credit is not transferable to another person, like a parent or spouse, only the student him or herself can use it, even if someone else actually paid the interest
  
• the credit is calculated at the lowest Federal tax rate (currently 15%) plus the lowest Provincial tax rate (e.g. Ontario is 6.05% so $100 interest would get the student $21.05 in tax credit/reduction); Québec as usual does its own thing and gives 20% flat credit; the credit does not change or increase if the student is in a higher tax bracket and since it is a tax credit not a deduction that reduces taxable income it cannot help to bring someone down into a lower tax bracket; in other words, there is no advantage in waiting - as soon as the student starts earning enough income to have tax to pay, he/she should claim the credit.
• the credit only applies to loans issued under the Canada Student Loans Act, the Canada Student Financial Assistance Act, or similar provincial or territorial government laws for post-secondary education (to check if a loan qualifies, ask the national student loans service center or see the list of provincial student loan contacts here on Canlearn.ca); loans from banks or private lenders don't qualify, nor does a qualifying loan if it has been combined with or refinanced as a private loan
• the claim is made on line 319 of Schedule 1 Federal Tax of the T1 and on the corresponding line in the provincial tax form - e.g. line 5852 on ON428 Ontario Tax
  

Student Working Holiday Visas and the WWB in Canada and the UK

"A fine idea until the governments got involved" might be a good way to summarize how this looks at first contact. The working holiday programme is a series of agreements amongst a number of countries, including Canada, the UK, the USA, New Zealand and others to encourage short-term and temporary visits by students and young people from 18 to about 30 with the permission to work while travelling.

The exercise of finding the information for a family member has unfortunately revealed the usual confusing and frustrating way that governments operate, despite all the ballyhoo in recent years about seamless, joined up government. Here are the ins and outs as I have discovered them.

Working in the UK
The non-government UK Student Life website has useful general information and points to the official UK government Border and Immigration Agency page on Working in the UK which states that an applicant should use form VAF1 (actually it is written as VAFI). Oops, Wrong! After considerable poking around, scratching my head and following other links I eventually found the truth as revealed in Working Holidays INF15 on the official UK Visas website that it is Employment Form VAF2 one must use. Want to know how much the visa costs? Too bad the FAQ includes everything except this obvious important fact. Oh, and don't bother phoning the general enquiries telephone number listed on this page - you will get a recorded message that live answering has been suspended due to lack of funds till January. No kidding, the government has no staff to answer questions by the public. More searching .... Does the UK Visas list of fees for the various types of visas page include the Working Holiday Visa? You guessed it, nope! I eventually found the British High Commission in Canada page of fees as converted to Canadian dollars showing a price of $420 for the Working Holiday Visa. First, why are they using an exchange rate of $2.10 when it is now around $2.03 and was as low as $1.90 within the last month. Second, isn't this a large amount, a punitive rate for students when the part-time restaurant and retail jobs they are likely to find only pay minimum wage rates of maybe £7/hr. The visa thus costs about two weeks worth of gross wages. Talk about an incentive to visit and work. It's probably more an incentive to come as a non-visa visitor and work illegally.

The Canadian Federation of Students has sponsored an organization called SWAP to arrange working holiday trips by Canadians students abroad, as well as foreigners to Canada.

Working in Canada
The Canadian government's Citizenship and Immigration website page on Working Holidays has general information on the program, as well as a link to the UK program within it. The UK program has four options, the operations for two of which have been outsourced to BUNAC (British Universities North America Club). Does the Citizenship website FAQ or the Fees link say what the visa fee is for the Working Holiday visa? You guessed it - no.

On to BUNAC. BUNAC requires students to sign up for a bundled service which includes the visa application process. I phoned BUNAC and reached a human being very quickly, who told me that up to now there has been no fee charged by the Canadian government for the visa, a fact not stated on the above government website. The BUNAC person also told me the Canadian government has advised them that there would be a visa fee in 2008 but they had not yet been told and would only learn it in early December. That's rather interesting since the processing time for applications is said to be approximately 4-6 weeks. I decided to phone the High Commission of Canada in London visa service to see if I could get the information. The telephone number at first seemed to want to lead me only to recorded messages and not have any options for speaking to a real person but luckily, (or unluckily, given what I was told by the real person), when I dialed 0 a live lady answered. She professed to know nothing about the working visa cost, referring me to BUNAC. When pressed about the fact that the visa and its cost is after all, a Canadian government decision exclusively, she seemed peeved that I should even expect to obtain this information from the High Commission and refused to provide me with any other Canadian government contacts who might elucidate the matter. So much for help from the Canadian government about its own requirements. The cost of the 2008 visa thus remains a mystery. I've sent an email to the Canadian Hogh Commission to try finding out and will post any results.

... Later in the day ... I phoned the official Citizenship and Immigration Call Centre and spoke to an agent who: a) denied that a visa is required at all to enter Canada on a Working Holiday basis; b) that only a work permit, costing $150, is required, just like any other worker; c) the http://www.canada.org.uk/visa-info/e_index.htm website is NOT an official government of Canada website because it does not use the .gc.ca domain name, despite all the links to official websites, seemingly official-looking downloadable forms, use of both the Citizenship and Immigration logo and the Government of Canada word with the flag logo, a statement that the website is that of the Immigration Section of the Canadian High Commission London, a whole raft of carefully prepared, grammatical, organized, fully-translated into French information and, most of all a direct link from the official Foreign Affairs Canada Canadian High Commission London website http://www.dfait-maeci.gc.ca/canada-europa/united_kingdom/embassy5-en.asp. Yet there seems to be no link to this website from the Citizenship and Immigration's http://www.cic.gc.ca/. Do a search on working holiday on this latter website and there are zero hits. Sigh!

All this trouble on one simple question, the cost of the visa in each country. Never mind all the rigmarole and documentation required (I love the UK form which requires you to fess up if you are a war criminal or a terrorist). Welcome to the WWB (World Wide Bureaucracy), students. You are better off using one of the student placement services to keep your sanity in my humble view.