# Personal Taxes: Few Questions!



## Nasha (Nov 14, 2013)

Hello, 

I have few tax related questions, and was hoping if you learned posters can assist me in understanding our tax system a little better.

1. Come next April, I believe I might be owing CRA some money on taxes. It is mainly because I recently found out that my tax deduction at source was not done properly (the issue has been corrected now). To avoid a material payout, I have started an RRSP, and in order to gain the maximum credit from the RRSP's, I wanted to understand how to compute taxable income from my gross income. As I understand, I should deduct the RPP from my gross income and then use the federal and provincial tax brackets to calculate my taxes. Is this correct? I am trying to find out how much is my taxable income before RRSP deductions. Are there any other deductions as well? 

2. I have a student loan, and I read somewhere that I can deduct interest paid on student loans from my taxable income. Is this true? I have paid interest in the previous years too but never deducted it. Can I claim deductions for previous years too?

3. I recently completed an international designation. Can I claim tuition credits for it? I believe I spent around $1500 and was not reimbursed by my employer. I am doing few other national and international designations too, but my employer is reimbursing me for those. As I understand, if I am being reimbursed I cant claim tax credit for it (sounds logical as well). Is my understanding correct?

Thank you in advance.


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## wendi1 (Oct 2, 2013)

Your taxable income before RRSP deductions and the amount deducted at source should be on your final pay stub for the year. No hurry on this, as you have until March 1st, 2014 to make your final RRSP contribution for 2013.

There may be other deductions, yes, but I don't know what they might be in your case. If I were you, I would run my information through a tax preparation program like QuickTax or Ufile, once again before March 1st. As long as you don't use the software to Netfile or print your tax return, most of the time they are free.

CRA has some information about student loan interest. You might be able to deduct it if the correct conditions are met. 
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/319-eng.html

Yes, you can change previous years (online, now - how exciting).
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/chngrtrn-eng.html.

Can you claim tuition credits? Maybe, but not if your employer is reimbursing you. 
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/323/lgbl-eng.html

Incidently, I have always found CRA to be happy to answer questions over the phone (probably gives them a break from people shouting at them).


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## Nasha (Nov 14, 2013)

I was replicating my 2012 tax returns, and was trying to use my own calculations to come to the tax returns calculations (filed through UFile) but for some reason my figures were off. Maybe its because of the "basic personal amount", and I am not sure how that factors in in the calculations. 

Thank you for the reply. I will call CRA and find out about tuition and loan interest credits.


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## P_I (Dec 2, 2011)

To your #1, there is nothing wrong with owing taxes in April. Although getting a refund seems advantageous, in reality it means that you have loaned money to the government interest free for the year. 

More prudent tax planning arranges things so that when you file your tax return you do have a balance owing. Keeping the balance owing under $3000 will help you avoid having to make instalment payments for the following tax year(s).

The basic personal amount, the tax bracket thresholds and a number of other items on our tax returns are indexed to inflation. See 2013 indexation adjustment for personal income tax, benefit amounts, and the annual dollar limit for Tax-Free Savings Accounts (TFSAs) for complete details.


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## amitdi (May 31, 2012)

Nasha said:


> I was replicating my 2012 tax returns, and was trying to use my own calculations to come to the tax returns calculations (filed through UFile) but for some reason my figures were off. Maybe its because of the "basic personal amount", and I am not sure how that factors in in the calculations.
> 
> Thank you for the reply. I will call CRA and find out about tuition and loan interest credits.


You need to understand tax deductions vs tax credits. Tax deduction reduces your taxable income (e.g RRSP). Tax credits comes in after your tax is calculated, it reduces your tax owed.

Your tution is multiplied by 15% and the amount is the actual tax credit for federal and provincial. So if you have paid $10K, then your federal tax will be reduced by $1500 and provincial tax by $1500.

I have prepared an Excel which does the same thing that you are looking for. But cpl of things -
- It does not have a manual (sorry I prepared it for myself, and was lazy to document)
- It is tailored for my personal priorities but should be good enough for general purpose
- Provincial rates are for MB, you will need to change those


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## Nasha (Nov 14, 2013)

P_I said:


> To your #1, there is nothing wrong with owing taxes in April. Although getting a refund seems advantageous, in reality it means that you have loaned money to the government interest free for the year.
> 
> More prudent tax planning arranges things so that when you file your tax return you do have a balance owing. Keeping the balance owing under $3000 will help you avoid having to make instalment payments for the following tax year(s).
> 
> The basic personal amount, the tax bracket thresholds and a number of other items on our tax returns are indexed to inflation. See 2013 indexation adjustment for personal income tax, benefit amounts, and the annual dollar limit for Tax-Free Savings Accounts (TFSAs) for complete details.


Thank you for the response. I agree with the notion that money owing at the end of the year is not really a bad thing for the reason you mentioned. A dollar's worth today is more than it would be tomorrow. Unfortunately I just didnt know until recently that I would be in such a situation. Hence, I did not plan properly and was not disciplined enough in my savings. But I will be careful moving forward. 



amitdi said:


> You need to understand tax deductions vs tax credits. Tax deduction reduces your taxable income (e.g RRSP). Tax credits comes in after your tax is calculated, it reduces your tax owed.
> 
> Your tution is multiplied by 15% and the amount is the actual tax credit for federal and provincial. So if you have paid $10K, then your federal tax will be reduced by $1500 and provincial tax by $1500.
> 
> ...


Thanks Amit for sharing the excel file, and for your explanation. I think I did not understand the tax credit vs tax deduction properly initially, and I believe I have a better understanding now.


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