Personal Finance

Can I carry tuition tax credit without using it?

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  • Apr 22nd, 2009 12:23 pm
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Newbie
Mar 3, 2006
62 posts
Toronto / San Jose

Can I carry tuition tax credit without using it?

Say I have a personal income of 50k this year, and I have carry-over tuition credit of 30k from last year.

Can I not use the 30k to deduct tax and carry them over again and use them like 5 yrs later? The reason I am asking about this is that when personal income is higher, tuition credit can lower the income tax bracket better... :cheesygri
16 replies
Member
Nov 16, 2004
429 posts
11 upvotes
wouldn't you be better off to get your money back (tax refund) now
rather than later?
Newbie
Mar 3, 2006
62 posts
Toronto / San Jose
bobbycat wrote: wouldn't you be better off to get your money back (tax refund) now
rather than later?
This really depends on how much higher my income would be in future years :D

Regardless of whether I should use the credit now or not, do you know about the legality of carrying tuition credit over without using it?
Deal Addict
Jul 28, 2005
3237 posts
27 upvotes
y10k wrote: Regardless of whether I should use the credit now or not, do you know about the legality of carrying tuition credit over without using it?
This question has been asked and answered many times. Just do a search on tuition credit.
Deal Addict
Jan 29, 2006
1775 posts
242 upvotes
ifyour referring to "unused education... amounts" i heard they expire after 5 years.
Member
Dec 14, 2007
278 posts
2 upvotes
Toronto, Ontario
No, you can not choose to use part of the tuition. You have to reduce your tax to 0, anything left over can then be transferred or deferred. Sucks, eh?
Deal Addict
Dec 28, 2006
2497 posts
138 upvotes
Saskatoon
species5618w wrote: No, you can not choose to use part of the tuition. You have to reduce your tax to 0, anything left over can then be transferred or deferred. Sucks, eh?
If you want to get really technical you don't HAVE to claim the credit BUT and it is a big BUT, the amount you are allowed to carry forward is the amount that you would have left over (if any) after reducing your tax payable to zero. So basically either you use the credit when you are supposed to or it is gone forever.

In reality, if you have T&E credits and you don't claim them when you are supposed to CRA is probably going to catch it and apply the credits whether you want them to or not.
Deal Addict
Sep 1, 2005
2469 posts
4 upvotes
ghostryder wrote: If you want to get really technical you don't HAVE to claim the credit BUT and it is a big BUT, the amount you are allowed to carry forward is the amount that you would have left over (if any) after reducing your tax payable to zero. So basically either you use the credit when you are supposed to or it is gone forever.

In reality, if you have T&E credits and you don't claim them when you are supposed to CRA is probably going to catch it and apply the credits whether you want them to or not.
Nope the CRA runs rather simple checks based on the forms supplied by the schools, you need to claim them in the tax year occurred first. I made a mistake one year and thought I'd just put the credit on the next years taxes, I ended up having to file an adjustment to the prior year.

Tuition doesn't work the same way RRSP's do, with RRSP's you can carry them forward until you want to use them where tuition needs to be used in the tax year occured and any carried forward will be used the next year, if theres any carry over again, its used the next year, and so on until its all gone. My sugestion would be use your tuition credits and carry over your RRSPs
Deal Addict
Sep 2, 2004
3138 posts
2300 upvotes
y10k wrote: This really depends on how much higher my income would be in future years :D
Actually, it doesn't. We've gone over this many times in recent posts. Tuition credits are non-refundable tax credits. That means you get a certain percentage of taxes paid back. It has nothing to with taxable income, personal tax rates, etc. and does not vary from person to person.
Jr. Member
Oct 31, 2006
182 posts
1 upvote
Capt. wrote: Actually, it doesn't. We've gone over this many times in recent posts. Tuition credits are non-refundable tax credits. That means you get a certain percentage of taxes paid back. It has nothing to with taxable income, personal tax rates, etc. and does not vary from person to person.
+1.... look up the definitions of "tax credit" vs. "deduction"


Tax credits like the tuition tax credit don't reduce you're taxable income and therefore have no advantage if carried forward to a year with greater taxable income, they are basically = (tuition and educational credits)*(base tax rate)

It is to your advantage to take advantage of the credit ASAP since the only thing that could change the value of the credit is the base tax rate and only if the rate increases in the future.
Deal Addict
May 24, 2006
2238 posts
881 upvotes
Trust me, CRA would NOT leave a hole this big in the tax system. :P

Most "tax saving" opportunity you can think of is covered off somewhere in the Act.
Member
Dec 14, 2007
278 posts
2 upvotes
Toronto, Ontario
br0pbr0p wrote: Trust me, CRA would NOT leave a hole this big in the tax system. :P

Most "tax saving" opportunity you can think of is covered off somewhere in the Act.
Yes, the biggest one being the childcare amount. The politicians all make it sound like a huge tax relief for families. In reality, it can only be claimed by the lower income partner and it can not exceed 2/3 of his/her income. I know people who would separate with his/her spouse just so they can claim the amount. Ironic for a family orientated tax relief, eh?
Deal Addict
Dec 28, 2006
2497 posts
138 upvotes
Saskatoon
dark169 wrote: Nope the CRA runs rather simple checks based on the forms supplied by the schools, you need to claim them in the tax year occurred first.
According to the Income Tax Act with respect to the T&E credits it says "you MAY claim" which means you don't have to.

But as I said, the amount you are allowed to carry forward (or transfer) is calculated by taking your T&E credits less the amount that would reduce your tax payable to zero. The left over amount is what you can carry forward.

There is nothing in the act that says you MUST claim T&E credits. If you choose not to and want to pay more tax than you have to that is your choice.
Deal Addict
Sep 2, 2004
3138 posts
2300 upvotes
My understanding was you must use them until all taxes paid for the year have been recovered. I think this information was given to a family member from an accountant (CA) but can't be sure on that.
Deal Addict
Dec 28, 2006
2497 posts
138 upvotes
Saskatoon
Capt. wrote: My understanding was you must use them until all taxes paid for the year have been recovered. I think this information was given to a family member from an accountant (CA) but can't be sure on that.
Let me put it this way. You have $10,000 in T&E credits. $7,000 of which would reduce your tax payable to zero. The ITA says "you may" claim this.

However, regardless of whether you claim it or not you can only carry forward (or transfer) $3000.

If you don't claim the $7,000 in credit then you just end up paying more taxes than you had to.
Newbie
User avatar
Mar 4, 2006
22 posts
1 upvote
Hi all,

I have a question closely related to this topic. 2 parts. I'm looking to maximize my tuition credit carryover.

1) Donations and gifts.
- This is calculated after the amount of tuition and the carryover of what's left. But my tuition already reduced my payable taxes to 0. I know donations can be carried forward to future years, so I can just leave the donations for later.

But what if I want to use the donation now? (or I have to, since it's been 5 years). The schedule 11 doesn't really give you any choices to adjust the tuition amount.

Is is possible to take into account the donations first so I can have a higher tuition carryover?

2) BC tax reduction
- With the $375 BC tax reduction, considering what I made last year, my BC taxes would still be 0 even if I don't use ANY of my tuition. But since you have to calculated tuition 1st, I have to use like $4000+ of my tuition credits.

Is it possible to keep that $4000+ for carryover next year? (Once again, Schedule BC (S11) doesn't really give you that option).


Any help would be appreciated. Thanks.
Newbie
Apr 21, 2009
13 posts
wt684 wrote: Hi all,

I have a question closely related to this topic. 2 parts. I'm looking to maximize my tuition credit carryover.

1) Donations and gifts.
- This is calculated after the amount of tuition and the carryover of what's left. But my tuition already reduced my payable taxes to 0. I know donations can be carried forward to future years, so I can just leave the donations for later.

But what if I want to use the donation now? (or I have to, since it's been 5 years). The schedule 11 doesn't really give you any choices to adjust the tuition amount.

Is is possible to take into account the donations first so I can have a higher tuition carryover?

2) BC tax reduction
- With the $375 BC tax reduction, considering what I made last year, my BC taxes would still be 0 even if I don't use ANY of my tuition. But since you have to calculated tuition 1st, I have to use like $4000+ of my tuition credits.

Is it possible to keep that $4000+ for carryover next year? (Once again, Schedule BC (S11) doesn't really give you that option).


Any help would be appreciated. Thanks.

This is a good question as it illustrates the limitations (and some would say unfairness) of the tuition/education credit carryforward rules. The short answer is that you cannot increase your tuition/education credit carryforward by declining to use the maximum credit in the current year.

As has been said earlier in this thread, the legislation does not require you to claim the full tuition credit. It says a taxpayer "may" deduct such an amount in computing tax payable. The problem is that the rules governing the unused amount carried forward are based on what you could have claimed, not what you did claim. The amount you could have claimed only takes into account certain credits (the personal amount, spousal amount, etc) but doesn't allow you to consider a host of other credits, notably the donations credit, dividend tax credit, foreign tax credit, ... and so on. The same applies to the BC tax reduction.

So, if you choose to claim less than your full tuition credit because you know you can soak up the rest of your federal and provincial tax payable with things like the donation credit and the BC tax reduction, your tuition credit carryforward will still be what it would have been had you claimed the maximum tuition credit in the current year.

This ordering of the credits is annoying because other sources of credit effectively go to waste. The policy argument would be that tuition credits are non-refundable and allowing taxpayers to carry forward unused credits is already generous (an argument that you may or may not find convincing).

Hope that helps!

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