Education, Tuition, and Textbook Tax Credit

[testing123]

On my osap app for UG, there is a beautiful number, $2,662 after "Education, Tuition, and Textbook Tax Credit".

 

Now as a pre-emptive warning, I have never done taxes/walked into the territorial grounds of finance, and so my question is, "what does this ("tax credit") really mean"? I have read bits of information in regards to it on the osap website, and this is what i'm able to deduce, "tax credits are transferable to family members", since i have no whatsoever income, then i was thinking of transferring these "Credits" to a family member, but does that in essence mean that the individual it is transferred to, i.e. parent, does not have to pay $2,662 in taxes (or gets a refund of that amount)?

 

Or is it something completely altogether (and i got this perception after reading one 'yahoo answer' in regards to it) because with true intentions forward, I was hoping to perhaps indirectly cash the $2,662 amount.

[thatonekid]

You won't be able to get the $2,662 in any type of cash (spendable) form. It's true that you can transfer this credit to a family member if you don't pay taxes yourself. Whoever you give the credit to can then can deduct that amount from their taxes (there are specific lines on the tax forms where you do this).

[testing123]

Thanks, but so as to reiterate for clarification;

 

I would be able to transfer this tax credit to a family member whom in return, would NOT have to pay (or get refunded) $2,662 in taxes?

 

If that is the case, wouldn't it be wise to have the credits transferred to a family member, and then, that specific family member in return, "pays" you the $2,662? Please do inform me of any possible mistakes/irregularities with this approach because for the moment, i feel a bit skeptical as i have yet to read about these tax credits to be taken advantage of by other individuals.

[rmorelan]

Thanks, but so as to reiterate for clarification;

 

I would be able to transfer this tax credit to a family member whom in return, would NOT have to pay (or get refunded) $2,662 in taxes?

 

If that is the case, wouldn't it be wise to have the credits transferred to a family member, and then, that specific family member in return, "pays" you the $2,662? Please do inform me of any possible mistakes/irregularities with this approach because for the moment, i feel a bit skeptical as i have yet to read about these tax credits to be taken advantage of by other individuals.

 

Well that pretty much is how it works. It is kind of the flip side of the governments belief that parents etc should be helping you out for education. Since they are expected to help, in turn they can be given a tax write off via you transferring things.

 

Now there is limit to this - you cannot just move it all over. I believe that limit is 5000 per year. What is left - and there will be some left - just accumulates year after year until you can use it. This is why in the first 1-2 years working you pay virtually no tax (if you can imagine the sum of both UG and whatever medical training adds up). Oh and you can only transfer to one person so no sneaking around the rule by transfering 5000 multiple times

 

Now at 5000 transfered the tax credit is not 2662, it would be much lower than that. Still every bit does help. I believe it is at a 18% tax credit (sorry if the number is off, I am doing this off of the top of my head). Works out to 900 dollars overall. Now again eventually you will get the full 2662, just not right now by your parents route. So think of it as a nice bonus when you actually have to pay your loans off.

 

If you do the math with OSAP having a max of 7000 a year owed (the rest a credit) and you getting 2662 in tax credits eventually one way or the other, your loan per year is in theory not actually that much - four years at about 4500 per year is 18000. Well not that much compared to the full OSAP total staring you in the face

 

Hope that makes sense and I am not missing anything!

[testing123]

Hi,

 

First of all, thanks for the information, it was greatly appreciative, let alone informative.

 

You responded to,

 

Originally Posted by testing123

Thanks, but so as to reiterate for clarification;

 

I would be able to transfer this tax credit to a family member whom in return, would NOT have to pay (or get refunded) $2,662 in taxes?

 

If that is the case, wouldn't it be wise to have the credits transferred to a family member, and then, that specific family member in return, "pays" you the $2,662? Please do inform me of any possible mistakes/irregularities with this approach because for the moment, i feel a bit skeptical as i have yet to read about these tax credits to be taken advantage of by other individuals.

 

With

 

Well that pretty much is how it works. It is kind of the flip side of the governments belief that parents etc should be helping you out for education. Since they are expected to help, in turn they can be given a tax write off via you transferring things.

 

Now there is limit to this - you cannot just move it all over. I believe that limit is 5000 per year. What is left - and there will be some left - just accumulates year after year until you can use it. This is why in the first 1-2 years working you pay virtually no tax (if you can imagine the sum of both UG and whatever medical training adds up). Oh and you can only transfer to one person so no sneaking around the rule by transfering 5000 multiple times

 

Now at 5000 transfered the tax credit is not 2662, it would be much lower than that. Still every bit does help. I believe it is at a 18% tax credit (sorry if the number is off, I am doing this off of the top of my head). Works out to 900 dollars overall. Now again eventually you will get the full 2662, just not right now by your parents route. So think of it as a nice bonus when you actually have to pay your loans off.

 

If you do the math with OSAP having a max of 7000 a year owed (the rest a credit) and you getting 2662 in tax credits eventually one way or the other, your loan per year is in theory not actually that much - four years at about 4500 per year is 18000. Well not that much compared to the full OSAP total staring you in the face

 

Hope that makes sense and I am not missing anything!

 

 

You lost me after the second paragraph with the last sentence "Oh and you can only transfer to one person so no sneaking around the rule by transfering 5000 multiple times."

 

From "Now at 5000 transfered the tax credit is not 2662" it becomes a bit confusing to comprehend, now i have $2662 posted on my osap funding with "tax credits" beside it, where did the 5000 number come from, and whats it for? Is that the minimum amount u can transfer tax credits at?

 

Now once again, this just completely confused me;

Now at 5000 transfered the tax credit is not 2662, it would be much lower than that. Still every bit does help. I believe it is at a 18% tax credit (sorry if the number is off, I am doing this off of the top of my head). Works out to 900 dollars overall. Now again eventually you will get the full 2662, just not right now by your parents route. So think of it as a nice bonus when you actually have to pay your loans off.

 

My only true question is that, if i transfer my (only) $2662 tax credits (all i have at the moment) to my parents/friend, do they get DEDUCTED/REFUNDED $2662?

 

Because to be honest, let me tell you what i planned on doing with this. I am a bit short of fulfilling living expenses, osap isn't being gentle, and my scholarships + bursaries value wont be enough, so im in need of money. I could convince, if it works the way i think i does, a family or a family friend to give me $2000 in hard cash, and I would give them $2662 in tax credits. They would profit $600 annually, but i dont mind, im just in need of $$.

So please tell me, does it work like this, if not could you explain it once again, i was really confused about

Now at 5000 transfered the tax credit is not 2662, it would be much lower than that. Still every bit does help. I believe it is at a 18% tax credit (sorry if the number is off, I am doing this off of the top of my head). Works out to 900 dollars overall. Now again eventually you will get the full 2662, just not right now by your parents route

[gb35]

 

My only true question is that, if i transfer my (only) $2662 tax credits (all i have at the moment) to my parents/friend, do they get DEDUCTED/REFUNDED $2662?

 

Because to be honest, let me tell you what i planned on doing with this. I am a bit short of fulfilling living expenses, osap isn't being gentle, and my scholarships + bursaries value wont be enough, so im in need of money. I could convince, if it works the way i think i does, a family or a family friend to give me $2000 in hard cash, and I would give them $2662 in tax credits. They would profit $600 annually, but i dont mind, im just in need of $$.

So please tell me, does it work like this, if not could you explain it once again, i was really confused about

 

 

No it doesn't work like this. Their taxable income gets reduced by 2662, they do not get 2662 credited to them. So, depending on the tax bracket they are in, and how much tax they have paid, they may just owe less taxes, or get refunded slightly more. But, at most, the amount refunded would be closer to 1300$ than 2662$, because the highest tax bracket gets taxed at something like 47%.

[hking03]

Here is what you should do.

 

Don't transfer your tax credits. Keep them for future use. It will work in your favor if you do this.

 

If you need money for school and it isn't covered by scholarships/bursaries/osap then go to the bank and get a line of credit cosigned by your mom, dad, brother, sister, uncle, aunt or whatever- for like 5k.

 

Then, in the summer get a job and pay down the line of credit... repeat for as many years as you need to.

 

If family won't co-sign and you don't qualify on your own, then you need to either get a loan from family to be paid back with whatever interest rate they set out, or you need to consider your options with regards to school. If you are currently registered at a university, maybe a college will be a better option for you as they are half the price.

 

Or, get a job and work part time... it's not ideal, but it's better than nothing.

 

Or, you could take a year off and save up some money, build your credit up and be able to apply for a personal line of credit without anybody else co-signing.

 

Don't try and transfer your tax credits... at least wait until you have enough to actually get a decent return.

[testing123]

Here is what you should do.

 

Don't transfer your tax credits. Keep them for future use. It will work in your favor if you do this.

 

If you need money for school and it isn't covered by scholarships/bursaries/osap then go to the bank and get a line of credit cosigned by your mom, dad, brother, sister, uncle, aunt or whatever- for like 5k.

 

Then, in the summer get a job and pay down the line of credit... repeat for as many years as you need to.

 

If family won't co-sign and you don't qualify on your own, then you need to either get a loan from family to be paid back with whatever interest rate they set out, or you need to consider your options with regards to school. If you are currently registered at a university, maybe a college will be a better option for you as they are half the price.

 

Or, get a job and work part time... it's not ideal, but it's better than nothing.

 

Or, you could take a year off and save up some money, build your credit up and be able to apply for a personal line of credit without anybody else co-signing.

 

Don't try and transfer your tax credits... at least wait until you have enough to actually get a decent return.

 

 

 

Thanks. But osap wasn't "generous" as to the amount they gave me, but thank -goodness for scholarships it adds up the total to ~17(min)k-19k (but tuition + comp fees= 10.5k).

 

The problem is need 1-3k "Cushion" money. And since cosigning isn't an option for me, ive spent the past day trying to find "loopholes" (as unfortunately, part time job isn't an option either when im studying engineering, though i do hold those capable of managing both, in relatively high regard); here's what i've come across so far, i've noticed that banks (e.g. rbc) factor in your credit ratings heavily before they decide if they want a cosign or not (the amount im requesting from banks is ONLY $1k-2k). But unfortunately, i dont have a credit history. Nor assets, nor income. Seems pretty bad eh?

 

Well here some things i've tried out to increase my "non existent" credit rating, some have failed, and others, have yet to produce a desire outcome;

 

1) Since osap provides 60% funding in the first semester, if you live on your own, and defer the other part of your tuition for next term, then i think that would leave you with roughly 2-3k for rent + food for the next few months. Now one thing I tried to do (im still trying) is to try to apply for a student LOC for a bare minimum amount of $1000, but the KEY would be to provide a security deposit to make it for the bank acceptable.

 

Provide a $1000 security deposit (cash upfront from what osap + scholarships gave you) for your $1000 student LOC. Seem's obviously to be nothing less than 100% safe for the banks... Now why would I/U do this?

Well for one, make whatever purchases you need to do so monthly (don't exceed $1000 in total with your purchases), and then perhaps 4 - 5 months later (you could even do this the very next month or even week if you wish), go to the bank, using your other 1k, just pay the bank $1000 and cancel your LOC, and retrieve your security deposit back. So what you have? You've basically just spent money on rent and food and etc, BUT because u used your student LOC, and made payments on it monthly, THEN you received an improved credit rating.

 

Now this seems to be plausible to work with because without a credit history, banks have very little guarantee to provide you a LOC without a cosigner. I'm still researching as to how "much" your credit rating would increase from this method. Once again, as a reiteration, this could be "repeated" to continually increase your credit rating, to eventually the point the bank (will most likely be a different bank than the one you kept cancelling LOC) will lend you a decent LOC amount without too much of a fuss on requiring cosign, or a high income.

 

2) the second method is somewhat similar, but i was heart broken after i found out its not that workable, and il explain below, but I WOULD GREATLY appreciate it if someone could verify it aswell;

 

here's what im talking about, get a student cc (2 if you can, it will make the process faster), if they require a security deposit, provide it, else i dont believe you'l too much trouble getting a student cc with a small limit like $500 monthly.

 

Essentially, make you're required purchases with ur cc(s), but PAY full balance at the end of every month, and this next part im not sure how it has any impact on it whatsoever, but i unfortunately feel it did come from a credible source somewhere online "in the months you dont have a balance, add (e.g put in) $30-$40 in your bank"). You can ignore last part if you wish, but apart from that, cancel your cc's, and you have your transformed credit rating gone from "non existent" to a "great" ranking. Now this is the part i need verifying, i talked to a "bank officer" on the phone, and he said if you cancel before 6months, your credit rating IS NOT AFFECTED WHATSOEVER.

 

Now many of you know that about 72 hours ago, if you were to read some of my other posts, that i did not know what prime rate, credit cards, and all these other things meant, and i feel i still don't, as i have yet to fully venture into the territorial grounds of "finance". So for safety reasons, there is likely problem(s)/flaw(s) with most of the information above, so i look forward to receiving constructive criticism.

 

Thanks