Quick Newbie Question about Taxes

[bs9999]

Just a very cheesy question for your guys about Ontario tax....my friend and i got to talking and..

This is just an example but lets say when $500 in interest is "tax deductible" then when i apply it to the tax return at the end of the year, if i made no income for the entire year, is that $500 all part of the return...meaning i would get that back as a check? Or does "tax deductible" mean it would reduce the taxes that i would normally owe "up to a max of $500" and as such no check representing the interest that was tax deductible would ever arrive?

[DanielCarrera]

Suppose you have $10,000 of taxable income and for some reason you have an expense of $500 that is tax deductible. This means that you subtract that from your taxable income, so now you only pay tax on $10,000 - $500 = $9,500.

HTH

[darren22]

Just a very cheesy question for your guys about Ontario tax....my friend and i got to talking and..

This is just an example but lets say when $500 in interest is "tax deductible" then when i apply it to the tax return at the end of the year, if i made no income for the entire year, is that $500 all part of the return...meaning i would get that back as a check? Or does "tax deductible" mean it would reduce the taxes that i would normally owe "up to a max of $500" and as such no check representing the interest that was tax deductible would ever arrive?

They don't just cut you a cheque. Depending on the type of deduction, you can carry it forward (i.e. save it and apply it to taxable income in the future). I'm not really sure what the deal is with deductible interest and whether you can carry it forward.

[Sanchez]

Deductible interest is a deduction against income and it cannot be carried forward. So if you have no income (or are below the basic personal amount) you receive no benefit.

[Capt.]

For whatever reason, no one seems to have answered your question fully. Taxable income for any year cannot be negative. The most you can reduce your income to is 0. I believe Sanchez is correct that interest payments can't be carried forward.