"The hardest thing in the world to understand is the income tax."
Music Students: To File or Not To File?
Author: Brad Howland
First Posted: October, 2000
Students are pretty busy, and income tax is probably the last thing on their minds. However, there are good reasons for filing a properly prepared tax return while in school, even if you are not required to pay tax.
Consider filing if you have any self-employment income while attending school. You can deduct expenses against that income and create a business loss (see above). You then carry the loss back and deduct it against income in the three preceding years. The amount left over can be carried forward and used in future years.
You will also be able to claim depreciation (known as Capital Cost Allowance) on "capital" equipment you purchase. Capital items are not used up right away, but last more than a year. For example, musicians can claim depreciation on sheet music, recordings, stereo equipment, and instruments. You probably won't need these expenses while attending school, but you can get them on record to write off against future income.
Even if you don't file a tax return, you should store all receipts for capital property. When you do start earning money as a musician, these items will be converted to business use and written off. Believe me, some day you will be glad you saved them!
If you do work and pay tax while attending school, and have equipment purchases, consider not claiming Capital Cost Allowance. Rather than writing off your equipment costs in the early years when income is low, you may be better off waiting until income is higher and you really need it.
Students are allowed to claim moving expenses to go to school or take up a new job. These expenses are written off against income in the new location, and if they are not used up can be carried forward one year.
Students can deduct tuition fees and education credits. The amount that is left over after taxable income has been reduced to nothing can be transfered to a spouse or parent. There is also a new option – you can keep the excess credits and carry them forward to future years.
The interest portion of student loan payments is now tax deductible.
As you can see, there are many tax advantages to filing a properly prepared tax return while in school. I hope I've convinced you!
This information is provided without warranty of any kind. All readers wishing to take advantage of the information offered here should consult a qualified income tax preparer. In no event will Brad Howland, Howland Tax Services, or this website be liable for any damages, including lost profits, arising out of the information offered on this website.