I got both my T4s and I entered them on TurboTax yesterday.
My income for 2016 was 7714.76, I was a full time student and my tuition was 3368.64.
A friend of mine told me that you can use the tuition fees carry forward amounts of the previous year towards your taxes to eventually reduced your taxes payable and increase your refund, he also stated that the income should be more than 10000 for that to happen.
My question is, how do you use your tuition carry forward/over amounts in turbo tax if the income was more than 10000? or does it automatically calculate it for you?
My 2nd question is, the refund amount before putting in my tuition fees was almost double the amount after I entered my tuition, is that normal?
Thank you in advance for reading and helping.
First of all, the important thing to note is not only your income but how much income tax was withheld. If you didn't pay much or anything in taxes, there will be nothing to refund.
That being said, Canada has one credit called the workers income tax credit. It is for full time workers (basically defined by not being a student). It is a refundable tax credit, which means it pays a bunch of money to low income earners irrespective of the taxes they paid. What Turbo tax was probably doing is allocating that money to you right up until it figured out you were not eligible for it when you entered your tuition information.
Thanks for your answer.
What about next year? I am currently a full time employee and my income is 40000+
How can I use my tuition Carry Overs? or does Turbo tax use it automatically?
I'm curious too, same situation, full time student last year but now working full time. Curious to know how much tuition carry over I have and how it will affect my first full-time refund.
Originally Posted by omaralslaman
I can't say what Turbo tax will do because I have never used it. I also do not use tuition and education credits but I believe they are entered on Schedule 11. Most software will probably use up whatever you need to bring your income tax owing to zero and then carry the rest forward.
So take a close look at schedule 11. It should show what is being used in 2016 and what is carried forward. When you are a good tax paying citizen (like someone earning $40,000 per year), you will start to get some serious benefit from these carry forwards. Whatever you use in those future years will put about 20% of it, or 100% of your taxes owing for that year, whichever is less, into your pocket, as a refund.
For example, if you have $10,000 of tuition credits, that would equal about a $2,000 of reduced taxes owing. If you only owed $1,500 without the credits then the amount of tax reduction will be $1,500 instead of $2,000. The other $500 worth of credits will carry forward to the next year.
One last point about refunds. There is a difference between a reduction in taxes owing and a refund. Tax credits reduce the amount of taxes you owe. A refund comes from the fact that you had MORE tax withheld from your paycheques then what you should owe. So you can see that reducing your taxes owing can lead to higher refunds but everything depends on whether you have already paid them some money in taxes.
An example here would be. If you owed $3,000 in taxes before using tuition credits and reduced your taxes owing by $2,000 by using $10,000 of tuition credits, you would only owe $1,000 in taxes. If you did not have any taxes withheld throughout the year, you will not get a refund. You will only owe $1,000 to the government as opposed to owing $3,000 before you used your credits.
I hope that makes some sense. Good luck and remember the golden rule of doing your own tax returns. Never look at the refund/amount owing until your are COMPLETELY done the return. Every number it gives you before you are done, is wrong.
It's my understanding that the tuition amounts MUST be used up if they will reduce your taxes, and any tax software will do this automatically. Then the carry-over will be reported to CRA and it should be on your notice of assessment, I would think. It's been like 20 years since I did this so my memory is a bit foggy.