Claim Your Student Loan Interest Tax Credit

A Debt 101 Calculator Article


Have you been keeping those annual "Statements of Interest Paid" that come from your student loan lender? If not, ask them to send those statements again. They're worth money to you. And if you're paying off student loans, you need that money!

Actually, you get the money as a 'tax credit' on the part of your student loan payments that went to interest charges. Your student loan payments can be made by you or or a family member but only you can claim the tax credit.


So how much can you get?

The federal government gives everyone the same tax credit on eligible student loan interest. At writing, this is 15 percent. But the provinces vary in their tax credit rates.

That's why Debt 101 has built an original Student Loan Interest Tax Credit Calculator. It lets you combine your federal and provincial tax credits and see approximately how much they should be worth in dollars.


                                        Student Loans That DON'T Get the Tax Credit


You can't claim a tax credit if you 'consolidated' your student loans in with other debt.

Some people do this to get a single monthly debt payment or a lower interest rate. Or they refinance their house and then roll their student loans into the deal. These strategies can pay off for some people. But for other people it can backfire, because student loans are a special type of debt. If you mix your student loans in with other debt, you can't get any more student loan repayment aid and you can't get this tax credit. For details, see Thinking of Consolidating?

You also can't claim the student loan interest tax credit if you're paying a
judgment obtained after you failed to pay back your student loan. 

However, if you don't fall in the above categories, you should be able to claim a tax credit on defaulted student loans. For details, see How to Get Your Student Loan Tax Credit When You're in Default.


                                                        How to Get Your Credit


Student loan interest tax credits, like many tax credits, have a limited shelf-life. You either use them or lose them.

Even though this particular tax credit began with the 1998 tax year, you can only carry your credit for 5 years. Here's an example of how that works...

Say you're doing taxes for 2009. You can collect older annual interest statements you didn't use already, going back to 2005. Just add them up and claim the total on line 319 of your federal tax form and on Form 428 (provincial taxes). Quebec residents are the exception: they only have to fill out one tax form.

If you're not earning money right now, save your annual statements for future income tax. There's no point claiming your tax credit in a year where you don't have to pay income taxes. That's because the student loan interest tax credit is "non-refundable." Non-refundable tax credits only produce money if you're paying taxes in the year you claim them.

The word 'non-refundable' confuses some people. Don't worry, your tax credit amount will be refunded to you - as long as all the tax you owe has been accounted for.

If your taxes were deducted off your payslip, you should get your tax credit amount as a refund unless you owe more taxes than you had deducted. But in any case, your tax credit amount will get subtracted from the tax you owe.

The only reason the government would not credit you with your interest tax credit amount is if they are collecting money from you on a defaulted student loan or on back taxes. Even in that case, the tax credit amount will come off your debt, so definitely claim it!


                                                               Tax-Filing Tips


If you're filing tax online, keep your annual statements of student loan interest paid with your tax records in case you have to show them later. If you're filing a paper return, mail them in with your other tax receipts, but first make a copy of all your tax receipts (including the annual statements) in case they somehow get lost.  

Do you have a low income this year, with few taxes to pay? You might only choose to claim the credit that will run out. That would be 2005 when you're filing 2009 taxes. You can save more recent annual statements for later, but remember that 5-year shelf life!

Some people claim the money each year so they don't forget to claim it. They also get the money faster. Others save up those annual "Statements of Interest Paid" that they get from their student loan lender.


                                                   Want to Save Even More Money?


Use your student loan interest tax refund to make an extra (lump sum) payment on your student loan.

Not one penny will get wasted on interest charges because extra payments directly reduce the amount you owe. This way, you'll save interest charges -- and get out of debt that much faster!




Learn More

  Let this Debt 101 Calculator do the math: Student Loan Interest Tax Credit Calculator. Canada Revenue Agency details are in the P105 pamphlet found in the Debt 101 Library, under Student Tax Rules.