Deferred Tuition tax credit?

[spontaneouscombustion]

Hi guys,

 

Does anyone know how we can claim the deferred tuition tax credit? I've heard from various sources that it needs to go on the TD1 form. I've also heard from others that it goes T1213 form. Does anyone have any insight?

 

And beyond where you're supposed to claim the credit, how exactly do I claim them? I have about $80k in credits - do I just put down 80k?

 

Thanks!

[supafield]

I called the CRA... the guy wasn't positive but said try the TD1 first because it's the easier thing to do and if that doesn't work file a T1213 using the "other" space.

 

So, I've put all my credits on my TD1 form and will see what they say. I have a feeling that this is an issue that is institution specific. I tried calling the HR and they really didn't seem to know. I might try them again see if I get someone else.

 

Sorry I can't give you a more definite answer!

[elmocookie]

Yes, if you have unused tuition, education, and textbook amounts you put them on the TD1 forms in the space for that. I called both my accountant, payroll in Toronto, and other residents who have done the same.

 

This should make X amount of dollars tax-free. They are carryforward amounts from previous years.

 

So if say you have 80K of unused credits, and your R1 salary is 51K, there is a box on the second page of TD1 that says to check if you total salary is less than your credits, and income tax will not be deducted.

 

Many residents do this.

 

With respect to which form to use - Use the TD1. You do have the option to use either form, but the TD1 is simpler.

[spontaneouscombustion]

Thanks guys!

 

Did you put it down in the provincial TD1, or the federal one? Or both?

[BoyInTheBubble]

You can put it down on both places. (They aren't necessarily the same amount.)

 

Doing this with your employer will eliminate the tax deductions from your paycheque.

 

If you do not do it this way, the tax credit is applied when you file your taxes and you will get a refund. The tax credits have to be used if they are available (as in are automatically applied). You cannot save the credit until you earn a higher income (even though that would give you a better tax savings).

 

 

Also, just cause it's not always obvious, it's a tax credit applied at 15%. Your 80k tax credit drops your taxable amount $12000 (80 x 0.15). It is not a 'tax deduction' which would decrease your taxable income by the amount of the deduction.

[elmocookie]

You can put it down on both places. (They aren't necessarily the same amount.)

 

Doing this with your employer will eliminate the tax deductions from your paycheque.

 

If you do not do it this way, the tax credit is applied when you file your taxes and you will get a refund. The tax credits have to be used if they are available (as in are automatically applied). You cannot save the credit until you earn a higher income (even though that would give you a better tax savings).

 

 

Also, just cause it's not always obvious, it's a tax credit applied at 15%. Your 80k tax credit drops your taxable amount $12000 (80 x 0.15). It is not a 'tax deduction' which would decrease your taxable income by the amount of the deduction.

 

I don't understand this comment. It is a tax deduction. You're saying if you have 80k of credits youre only saving 12k of taxable income? I.e., if my R1 salary is 51k it essentially drops my R1 salary to 39K which is fully taxable? That is definitely not what I have been told by my accountant or payroll. If your tuition amounts exceed your income amounts your income is not taxed.

[NLengr]

Your tuition credit is definitely not credited against your salary dollar to dollar.

[elmocookie]

I just spoke to the CRA

I get it now.

 

Essentially you get 15% of the tuition amount as credit.

If your credits exceed your salary, employer does not deduct tax.

 

So R1 year - say 51k of salary. Taxes owed equal to roughly 7-8k if you had no tuition credit. Payable either off your paycheque or lump sum at end of year.

 

With credit: You are relieved of 15% of your tuition. So if one has 80k of credit, you deduct 12k from whatever tax is owed (which is more than enough to cover the 7-8k of R1 salary that is taken off).

 

The credits not used carry forward.

[rmorelan]

I just spoke to the CRA

I get it now.

 

Essentially you get 15% of the tuition amount as credit.

If your credits exceed your salary, employer does not deduct tax.

 

So R1 year - say 51k of salary. Taxes owed equal to roughly 7-8k if you had no tuition credit. Payable either off your paycheque or lump sum at end of year.

 

With credit: You are relieved of 15% of your tuition. So if one has 80k of credit, you deduct 12k from whatever tax is owed (which is more than enough to cover the 7-8k of R1 salary that is taken off).

 

The credits not used carry forward.

 

exactly - only wrinkle is you have no choice but to use them if you have them (not that is makes any sense not to I suppose )

[elmocookie]

exactly - only wrinkle is you have no choice but to use them if you have them (not that is makes any sense not to I suppose )

 

I think it makes the most sense to use them. The first few years are likely when cashflow will be the tightest. I personally would rather have tax saved now rather than later. Makes the income slightly more palatable (i.e., 50K or so after tax plus call stipends of a few grand = 55k post-tax income. Thats close to an equivalent salary of about 70k...in a two income household for those of us that have partners thats pretty decent...even if it is equivalent to pennies an hour...

[rmorelan]

I think it makes the most sense to use them. The first few years are likely when cashflow will be the tightest. I personally would rather have tax saved now rather than later. Makes the income slightly more palatable (i.e., 50K or so after tax plus call stipends of a few grand = 55k post-tax income. Thats close to an equivalent salary of about 70k...in a two income household for those of us that have partners thats pretty decent...even if it is equivalent to pennies an hour...

 

oh I agree - it never makes sense to defer to the future the same amount of money you can get today. Still every once in a while I run into someone that thinks it is a good idea (using it as some kind of forced savings plan I guess - so they can get a big refund in the future when they know they will have an expense of some kind)

 

and yeah with the taxes out of the way residents are actually pretty "ok" income wise. It is a real job with real money etc

[BoyInTheBubble]

I think it makes the most sense to use them. The first few years are likely when cashflow will be the tightest. I personally would rather have tax saved now rather than later. Makes the income slightly more palatable (i.e., 50K or so after tax plus call stipends of a few grand = 55k post-tax income. Thats close to an equivalent salary of about 70k...in a two income household for those of us that have partners thats pretty decent...even if it is equivalent to pennies an hour...

 

Yea the bump in take-home is substantial at this point.

 

And yes, it was a bit shocking to learn the difference between a tax deduction and tax credit.

[Retractable]

This is only for federal deduction right? The 15% is a federal rate. Does this apply to the provincial component at all?

[rmorelan]

Yea the bump in take-home is substantial at this point.

 

And yes, it was a bit shocking to learn the difference between a tax deduction and tax credit.

 

makes sense though how they do it here - I mean a deduction would favour people with a higher income as they would be in a higher marginal tax bracket - rewarding the more wealthy with a bigger refund. Not exactly good educational policy