How much does Tuition reduce taxible income?

[Justin]

By claiming my tuition and school expenses i will not really benifit since i'm not paying very little income tax anyways. How many years can this be carried over for?


If i transfer this to my dad how do i calculate how much his taxible income will be reduced by? I also read that students can claim $400 a month for expenses.

So my tax receipt shows i paid approx $3700 in tuition in 2006 and 8 full time months.

I found a number (15.25%) to use for calculating the tax credit for tuition and expenses. Is that the right number?

If so would i just go 3700 + (400 x 8) = 6900 x .1525 = 1052


So would his taxable income be reduced by $1052? and then to figure out how much he will save by using my tuition receipt i multiply $1052 by the tax rate depening which tax bracket he falls into?

Thanks for your help

[Sanchez]

It's a credit, not a deduction against income. So the number 1052 is amount of tax your father would save. Marginal tax rate doesn't come into it, so anyone (who pays at least enough tax to fully use the deduction) would save the same amount.

You can carry forward any unused credits indefinitely.

[Redmen62]

It's a credit, not a deduction against income. So the number 1052 is amount of tax your father would save. Marginal tax rate doesn't come into it, so anyone (who pays at least enough tax to fully use the deduction) would save the same amount.

You can carry forward any unused credits indefinitely.

A couple of things here are contrary to what I understand about the tuition tax credit- hopefully we can confirm exactly how everything works.

For one thing, the maximum amount that can be transferred to a spouse, parent, etc. is $5000 (for my SK return, anyway), so you cannot transfer the full $6900 that yields the $1052 number.
Also, you mention that unused credits can be carried forward indefinitely. I was under the impression that unused credits expire after five year, but I'm not nearly 100% on that one. I do know that credits that have been carried forward can not be transferred to a spouse/parent in a later year.

Hopefully we can clarify completely how the credit operates...

[mystical2003]

By claiming my tuition and school expenses i will not really benifit since i'm not paying very little income tax anyways. How many years can this be carried over for?


If i transfer this to my dad how do i calculate how much his taxible income will be reduced by? I also read that students can claim $400 a month for expenses.

So my tax receipt shows i paid approx $3700 in tuition in 2006 and 8 full time months.

I found a number (15.25%) to use for calculating the tax credit for tuition and expenses. Is that the right number?

If so would i just go 3700 + (400 x 8) = 6900 x .1525 = 1052


So would his taxable income be reduced by $1052? and then to figure out how much he will save by using my tuition receipt i multiply $1052 by the tax rate depening which tax bracket he falls into?

Thanks for your help

In most provinces, the max transferrable is $5000 as another poster indicated. You also have to take into account the provincial taxes saved, this would be on top of the 15.25% federal rate. Their are many tax calculators online that will allow you to put in all the numbers and figure it out.

Easiest way to get an exact number if you are unsure of how to calculate and use just the credit portion is to fill out your dads taxes with and without this transfer and see what the difference is.

[Jobu]

"Taxible"? "Benifit"?

Yikes, education isn't what it used to be.

[jerryhung]

"Taxible"? "Benifit"?

Yikes, education isn't what it used to be.

HA HA HA, that makes my day :D quote of the day

[ghostryder]

By claiming my tuition and school expenses i will not really benifit since i'm not paying very little income tax anyways. How many years can this be carried over for?



You MUST use your tuition and education credits yourself up to the point that your tax payable is zero. If there is any left it can be transferred (up to $5000) or carried forward. Once you carry forward you cannot transfer.

The carry forward is indefinite IIRC, but the above rule applies, you MUST use tuition & education credits up to the point your tax payable is zero. You cannot chose to not take them.

This is all calculated on schedule 11.

[leolee_ca]

It's a credit, not a deduction against income. So the number 1052 is amount of tax your father would save. Marginal tax rate doesn't come into it, so anyone (who pays at least enough tax to fully use the deduction) would save the same amount.

You can carry forward any unused credits indefinitely.


In Ontario, applying tuition credit may decrease your Ontario surtax, which is 20% and 56% additional tax on top of your Ontario tax.

[Justin]

So, my dad will save 15.25% of $5000 on the federal level? Does anyone know how much he will save on the provincial level for saskatchewan?

Does that $5000 limit include tuition plus the $400/month expense allowance.

What about books. Can i claim $65 books for each month?

[alysomji]

"Taxible"? "Benifit"?

Yikes, education isn't what it used to be.

Exactly what I was thinking but I didn't want to be mean.

[ghostryder]

So, my dad will save 15.25% of $5000 on the federal level? Does anyone know how much he will save on the provincial level for saskatchewan?

Does that $5000 limit include tuition plus the $400/month expense allowance.

What about books. Can i claim $65 books for each month?

Yes. You can transfer up to $5000 of tuition and education NRTC
11%. Again you can transfer $5000 of t & e credits to your dad's prov return
Yes. The $400/month is the "education amount"
Yes, if you are full time it is $65. There is a calculation for books on the shedule 11 (fed only at this point)

Federal shedule 11:

http://www.cra-arc.gc.ca/E/pbg/tf/5000-s11/5000-s11-06e.pdf

Prov schedule 11:

http://www.cra-arc.gc.ca/E/pbg/tf/5008-s11/5008-s11-06e.pdf

[Justin]

Yes. You can transfer up to $5000 of tuition and education NRTC
11%. Again you can transfer $5000 of t & e credits to your dad's prov return
Yes. The $400/month is the "education amount"
Yes, if you are full time it is $65. There is a calculation for books on the shedule 11 (fed only at this point)

Federal shedule 11:

http://www.cra-arc.gc.ca/E/pbg/tf/5000-s11/5000-s11-06e.pdf

Prov schedule 11:

http://www.cra-arc.gc.ca/E/pbg/tf/5008-s11/5008-s11-06e.pdf



thanks for your help.

When i multiply (15.25 +11) by 5000, i get a $1312.50 savings on income tax owed.

I used a online calculator and it shows that by using the $5000 there would be a savings of $1255.

hmm...why the difference?

[atta]

What's the difference between a tax credit and income deduction?

[Redmen62]

Another question:

My tax preparer told me today that you can't transfer your tuition to a parent if you're common-law. Could she have meant that both myself and my spouse must have tax down to zero before transfer, or is it just prohibited?

[fwhc022883]

What's the difference between a tax credit and income deduction?

Tax credit is a credit on the taxes you pay, that is, if you don't need to pay taxes, then you can't use the tax credit. You also can't get this money back in a refund if you don't have any taxes to pay. e.g. Monthly bus pass

Income tax deduction is having money deducted off your gross income so you pay less tax and will get back a refund. e.g. RRSP

[ghostryder]

Another question:

My tax preparer told me today that you can't transfer your tuition to a parent if you're common-law. Could she have meant that both myself and my spouse must have tax down to zero before transfer, or is it just prohibited?

False. You must claim your credits up to the point your tax payable is zero. If you going to transfer you can chose who to transfer too. Spouse, common-law, parent, grandparent.

http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/deductions/lines300-350/323/carry-forward-e.html


You have to claim your tuition, education, and textbook amounts first on your own return, even if someone else paid your fees. However, you may be able to transfer part or all of the unused part of these amounts to your spouse or common-law partner (who would claim it on line 326 of his or her Schedule 1) or to your or your spouse or common-law partner's parent or grandparent (who would claim it on line 324 of his or her Schedule 1).

You can transfer the unused part of these amounts to only one person

[ghostryder]

thanks for your help.

When i multiply (15.25 +11) by 5000, i get a $1312.50 savings on income tax owed.

I used a online calculator and it shows that by using the $5000 there would be a savings of $1255.

hmm...why the difference?


Which calculator did you use?

[Justin]

Which calculator did you use?

http://www.taxtips.ca/taxcalculator.htm

[ghostryder]

thanks for your help.

When i multiply (15.25 +11) by 5000, i get a $1312.50 savings on income tax owed.

I used a online calculator and it shows that by using the $5000 there would be a savings of $1255.

hmm...why the difference?

When I put some made up numbers in to that calculator I get $1312.50. Are there other variable you are putting into the calc?


Keep in mind that the calculations are different for fed & provincial. And they are non-refundable tax credits. So if the total of all the credits is more than your tax payable they do not generate a refund.

5000 x 15.25% = $762.5 credit against Federal tax payable only.

5000 x 11% = $550 credit against Provincial tax payable only.


There could be an error in their calculator too. I think they made some changes to it recently.