Personal Finance

Question about Education Credits and Carry forwards

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  • Apr 20th, 2016 7:54 am
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Newbie
Aug 8, 2004
89 posts
11 upvotes
Niagara Falls

Question about Education Credits and Carry forwards

Hi guys,

I've been in school forever and have a ton of education credits. About 68G federal and 51G provincial. My income this year is about 63G pre-tax but when I input this into simple tax, it decimates my education credits, leaving only 16G federal to carry over for next year.

I'm looking through the forms and it seems to fit their calculation but I don't really understand how I've used up so many credits?? Please explain if possible!!

Thanks!
6 replies
Deal Addict
Jan 16, 2016
1477 posts
1139 upvotes
Hamilton, ON
yoyolib wrote: Hi guys,

I've been in school forever and have a ton of education credits. About 68G federal and 51G provincial. My income this year is about 63G pre-tax but when I input this into simple tax, it decimates my education credits, leaving only 16G federal to carry over for next year.

I'm looking through the forms and it seems to fit their calculation but I don't really understand how I've used up so many credits?? Please explain if possible!!

Thanks!
Grants offset your taxable income. Since your taxable income on the federal level is 63 thousand, less the personal exemption which is about 11 thousand, leaves 52 thousand. Therefore, you used 52 thousand of your 68 thousand credits to reduce your income to no tax. If you didn't file a TD1 at your workplace this year to offset the amount of tax your company would take from your paycheck, you will get a very large refund.
Sr. Member
User avatar
Dec 23, 2008
915 posts
121 upvotes
Guelph
Altera wrote: Grants offset your taxable income. Since your taxable income on the federal level is 63 thousand, less the personal exemption which is about 11 thousand, leaves 52 thousand. Therefore, you used 52 thousand of your 68 thousand credits to reduce your income to no tax. If you didn't file a TD1 at your workplace this year to offset the amount of tax your company would take from your paycheck, you will get a very large refund.
I believe Grants are NOT taxable if you are a full time student.
Deal Addict
Oct 30, 2006
2467 posts
1082 upvotes
GTA
newgame99 wrote: I believe Grants are NOT taxable if you are a full time student.
He meant credit not grant.

But to clarify, credit reduce your taxes payable not your income. You get a credit at the lowest tax rate, therefore it does not have the same impact if you make more than the lowest tax bracket

Don't worry use your credits l, there is no financial reason to hold them as they do not increase in the value you will receive, asking the lowest tax rate does not increase, it could also decrease.
Sr. Member
Oct 14, 2012
954 posts
728 upvotes
Woodstock
Were you perhaps thinking that the education/tuition amounts reduce your taxes dollar for dollar? That's a common mistake, if you were thinking that, which is why I'm asking.

The way it works is you made say $ 63 000 in 2015.
According to the Ernst and Young personal tax calculator, in Ontario, with no extra deductions, that would mean you would owe about $12 620 in tax, most of which should have been deducted by your employer.
http://www.ey.com/CA/en/Services/Tax/Ta ... rsonal-Tax

You don't use up $12 620 of your education amounts though to reduce this tax payable to 0.

The education/tuition amounts are converted into credits at a really low percentage.
Line 23 (also called 323) on your Schedule 1 is the amount of the edu/tuition you are using.
As you can see further down on Line 32 you apply a rate of 15% to that amount.

So to negate $1000 of tax owing, you have to use up $6 666 of your education/tuition amount.

If it's using up $52 000 of your federal education/tuition amount, it should be reducing your federal tax owing by about $7 800.

As someone has already mentioned, you may be getting quite a nice tax refund this year. As you've noticed, though, you won't get much next year because you'll have very few credits left.

If the edu/tuition amount was applied $ for $ against your taxes owing, it would be great, because it would mean the government was paying for your schooling. Unfortunately, they are only willing to pay for 15% of your schooling. (Plus a bit more if your province gives you a tax break on your provincial taxes.)

If this wasn't what was confusing you, I'm sorry to have droned on and on. Maybe it will help another reader though.
Deal Addict
Jan 16, 2016
1477 posts
1139 upvotes
Hamilton, ON
BetCrooks wrote: Were you perhaps thinking that the education/tuition amounts reduce your taxes dollar for dollar? That's a common mistake, if you were thinking that, which is why I'm asking.

The way it works is you made say $ 63 000 in 2015.
According to the Ernst and Young personal tax calculator, in Ontario, with no extra deductions, that would mean you would owe about $12 620 in tax, most of which should have been deducted by your employer.
http://www.ey.com/CA/en/Services/Tax/Ta ... rsonal-Tax

You don't use up $12 620 of your education amounts though to reduce this tax payable to 0.

The education/tuition amounts are converted into credits at a really low percentage.
Line 23 (also called 323) on your Schedule 1 is the amount of the edu/tuition you are using.
As you can see further down on Line 32 you apply a rate of 15% to that amount.

So to negate $1000 of tax owing, you have to use up $6 666 of your education/tuition amount.

If it's using up $52 000 of your federal education/tuition amount, it should be reducing your federal tax owing by about $7 800.

As someone has already mentioned, you may be getting quite a nice tax refund this year. As you've noticed, though, you won't get much next year because you'll have very few credits left.

If the edu/tuition amount was applied $ for $ against your taxes owing, it would be great, because it would mean the government was paying for your schooling. Unfortunately, they are only willing to pay for 15% of your schooling. (Plus a bit more if your province gives you a tax break on your provincial taxes.)

If this wasn't what was confusing you, I'm sorry to have droned on and on. Maybe it will help another reader though.
No, I did say taxable income, And that brings your tax owing to zero. I did not say it reduces your tax owing dollar for dollar.
Sr. Member
Oct 14, 2012
954 posts
728 upvotes
Woodstock
Hi, Altera. I was answering the OP not responding to your correct reply--sorry that wasn't clear! I've found some students surprised to discover that they only get a 15% value for their edu/tuition amounts so I was trying to explain the details of the tax form.

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