# Education Tax Credit



## cmac7456 (Jan 28, 2014)

I have $35,000 of unused educational tax credits from my 4 years of University. 

I am now making a gross pay of $49,000. If I use all of my tax credits I will receive reimbursement of approximately $7,000. If I use nothing I will still get back $500. Is this an avenue I should take? (get the $7,000). I have heard from some people that waiting to use the educational credits until you are at a higher income level with allow you to get more money back. Is there anyway to actually figure this out? (educational tax credit calculator based on income). 

I could use the money to pay off some of my student loans and reduce the interest I have to pay. Or would it be more beneficial to wait? Everyone seems to be telling me something different. 

Any insight on how to maximize my return with my educational tax credits would be great. 

Thank you,

Calvin


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## ehrof (May 2, 2011)

Calvin - since these are tax credits, their value to you won't charge as your income rises. What you are thinking about are deductions which would lower your taxable income.

Regardless of when you claim then, they are worth about 15.5% of the balance federally plus perhaps something provincially (depending on your province). I suggest to use them all this year, if possible. Most tax software programs will calculate the optimal amount for you to claim.


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## stardancer (Apr 26, 2009)

You have no choice but to use the tuition/education credits. If you don't, CRA will automatically apply them each year until they are gone.


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## Guban (Jul 5, 2011)

Stardancer is correct. Don't claim anything else after line 323 on schedule 1 until those credits are used up, or else CRA will adjust your return to claim them, and you may lose the other credits (such as medical or donation). Since student loan interest appears on line 319, you can claim it. As ehrof points out these are all tax credits, and will basically give you the same amount back regardless of your tax bracket. Not sure about your province and its tax rules.


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## Zeeshanbmerchant (Jan 4, 2014)

You dont have a choice, you have to use them at first opportunity, even at the expense of other credits that you may not be able to carry over

Such is the rule with tuition/education credits. 

Sorry, do it yourself, instead of having CRA do it for you. If you claim other credits, and CRA has to readjust they may disallow those other credits in the future. 

Also credits are at the lowest tax bracket, 

both points were already mentioned just thought i'd reiterate, 

Also dont pay off your student loans, at the expense of other debt. Interest from student loans is a tax credit, I can pay off my student loans from my line of credit by why would I, one of the lowest interest rates with tax credits


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## warp (Sep 4, 2010)

As a sidenote.....a taxpayer MUST use his education credits before he/she can use his/her dividend tax credits, if there is Canadian dividend income.

Since the actual amounts of dividends received will be groosed up for tac purposes, you will , infact, be using up education credits against "phamtom" dividend grossed up income.

This is another stupid wrinkle in our stupid tax system, and we are living this nonsense in our family right now.

In essence a taxpayer should try and AVOID dividend income until all education credits are used up.


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## Guban (Jul 5, 2011)

^ the dividend tax credit is claimed after line 323 on schedule 1, so warp is correct. Warp is also correct about this being nonsense. It would be nice to be able to arrange the non-refundable credit claims in an order that makes sense. Why not claim the ones that can't be carried forward first and defer ones such the tuition credits to the future? 

The one that really hurts is a graduate who has been going to university for several years and carrying forward the education credits, such as the OP, who subsequently gets a job outside of Canada and pays tax to the foreign country. The new grad would be forced to use up all of the school credits before being allowed to claim a foreign tax credit for taxes paid. In essence, the tax return result is the same as if the worker had no carry forwards! All of that potential tax savings used up to no end! Almost makes the new grad want to give up Canadian residency before getting that foreign job.


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## warp (Sep 4, 2010)

^ Another stupid wrinkle in our tax system, pointed out by Guban with regards to foreign tax credits.... which means we can't/shouldn't buy any US or intl stocks that will withhold taxes in one of our family members cash accounts.
I am considering UK stocks sold in New York. as there are no taxes witheld on divs, and the income is considered regular income for tax in Canada.

Guban makes a great point, which I have said for yeras that a txpayer should be able to use his credits/deductions in whatever order make sense to his or her personal situation. 
As it stands now, CRA forces taxpayers to use tax credits in a specific order decided by them,,,even if it hurts taxpayers.

I have been ranting on this forum for years about a need to simplify our idiotic tax system,,and just go to a Flat Tax, and eliminate all this nonsense.


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## Zeeshanbmerchant (Jan 4, 2014)

Flat tax wouldn't raise a third of the required revenue. 

Unless ofcourse you mean a graduated flat tax


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## warp (Sep 4, 2010)

Zeeshanbmerchant said:


> Flat tax wouldn't raise a third of the required revenue.
> 
> Unless ofcourse you mean a graduated flat tax


While I am personally against a graduated flat tax....it would be something I would agree with if they would just simplify out moronic tax system, which seems to be over the heads of most regular taxpayers. I find that appalling.
The way I look at it is that if someone makes 10 times as much as I do,,he will pay 10 times as much tax as I do.....seems fair to me.
However a graduated flat tax with perhaps 3 barckets that rise as income rises would be way better than the idiotic system we have now.

If filing and paying taxes is a legal requirement , then it stands that it should be relatively easy for any Canadian to comply with , instead of having to run to "tax professionals", who are at times useless themselves. And also why should a taxpayer have to pay someone to do their taxes because its too hard to understand and comply with?...( let alone that these fees are not even tax deductible, which is stupid too).


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## Taraz (Nov 24, 2013)

Guban said:


> ^ the dividend tax credit is claimed after line 323 on schedule 1, so warp is correct. Warp is also correct about this being nonsense. It would be nice to be able to arrange the non-refundable credit claims in an order that makes sense. Why not claim the ones that can't be carried forward first and defer ones such the tuition credits to the future?
> 
> The one that really hurts is a graduate who has been going to university for several years and carrying forward the education credits, such as the OP, who subsequently gets a job outside of Canada and pays tax to the foreign country. The new grad would be forced to use up all of the school credits before being allowed to claim a foreign tax credit for taxes paid. In essence, the tax return result is the same as if the worker had no carry forwards! All of that potential tax savings used up to no end! Almost makes the new grad want to give up Canadian residency before getting that foreign job.


Work while you're in school (and over the summer) to use it up.


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## warp (Sep 4, 2010)

Zeeshanbmerchant said:


> Flat tax wouldn't raise a third of the required revenue.



Required Revenue??.....there's a contradiction in terms!

If you leave it to the government to decide what their "required revenue" is...you'd better hang on to your wallet because you wouldn't have much left, once they get through with you.

This is one of the problems, they will ALWAYS try and spend more, and "raise more required revenue", forever!

Perhaps if we could figure out how to do this process in the opposite direction, and have taxpayers decide for all levels of government beforehand, what their "revenue" will be, as decided by us, they would learn to live within their means, like the rest of us have to do.


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## Zeeshanbmerchant (Jan 4, 2014)

warp said:


> Required Revenue??.....there's a contradiction in terms!
> 
> If you leave it to the government to decide what their "required revenue" is...you'd better hang on to your wallet because you wouldn't have much left, once they get through with you.
> 
> ...


I know you don't agree with our tax system, but its the best we have

if we left the tax payer to decide, then most would decide to not to invest in the simple necessities of life, as human beings by nature are terrible in making long term decisions. It would only be after they get sick, unemployed, infirm, robbed, that they would come running to the government

The flat tax argument is the worst i have ever heard. there is nothing wrong with the Canadian tax system. There is something wrong with Canadian Citizens who use the same tax money every day, but take it all for granted.


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## warp (Sep 4, 2010)

Zeeshanbmerchant said:


> The flat tax argument is the worst i have ever heard. there is nothing wrong with the Canadian tax system. There is something wrong with Canadian Citizens who use the same tax money every day, but take it all for granted.


There is nothing wrong with the Canadian Tax system??

You can say that with a straight face??....I think about 30 million Canadians would disagree with you.

Are you an accountant?...


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## Zeeshanbmerchant (Jan 4, 2014)

warp said:


> There is nothing wrong with the Canadian Tax system??
> 
> You can say that with a straight face??....I think about 30 million Canadians would disagree with you.
> 
> Are you an accountant?...


I absolutely am with two professional designations.

Ofcourse they would. No tax breaks are enough for people. The current tax system is very fair and though the government can use tax revenue more efficiently the current system ranks with the best in the world.


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## OurBigFatWallet (Jan 20, 2014)

As mentioned above unfortunately you need to use the credits once you become taxable. They can't carry forward if you have taxes owing. They only carry forward when you aren't taxable (ie still going to school so little or no income). It's not ideal but at least it will provide for a decent refund in that year


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## WillyA (Apr 14, 2011)

I had a lot of credits similar to yours but I blew through most of mine in 1 year and I didn't even get a good refund (under $100) I had 2 jobs all year that got me to mid $60's and I claimed the basic personal amounts for both (on purpose) but I was surprised to have nothing coming back when I filed (putting the 2 jobs together increased my marginal rate and then things like the Ontario Health Premium jumped in as well)


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## warp (Sep 4, 2010)

Zeeshanbmerchant said:


> I absolutely am with two professional designations.
> 
> Ofcourse they would. No tax breaks are enough for people. The current tax system is very fair and though the government can use tax revenue more efficiently the current system ranks with the best in the world.


Thats hardly a surprise, that you answered that in fact you are an accountant.

Only an accountant , who profits from our stupid, complicated, and idiotic tax system could say there is nothing wrong with it.

You probably make a nice living explaining this stupid system to regular taxpayers...and business owners, for whom the tax system is even more complicated, and ridiculous.

This simple fact expalins why you like it.


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## Zeeshanbmerchant (Jan 4, 2014)

As ive already mentioned this us the greatest country in the world ( except the weather) and our tax system is the best in the history of civilization


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