# Tuition credit and dividend credit



## Dave (Apr 5, 2009)

I am helping a family member with taxes and have a dilemma. They have 35K of tuition credits and and a taxable income of 50K of dividends. Small employment income. CRA sais the following: 

''Students must claim their tuition, education, and textbook amounts on their return and apply the amount that is required to reduce their own federal tax payable to zero.''

However, in the calculation of the tuition credit that needs to be used, they do not take into account the credit for canadian dividends that is substracted later. Thus, can I use the tuition credit partially and toghether with the dividend credit bring the federal tax to zero without using their formula which does not take into account the dividend credit ? I hope my question is clear. 

Dave


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## stardancer (Apr 26, 2009)

Unfortunately not. If you don't use the full amount of tuition/education credits to reduce the taxable income to zero, CRA will do it automatically when processing the return. CRA would look at the two credits as being two different things- one is a non-refundable credit to be used on schedule 1; the other is a direct subtraction from federal taxes owing (same thing for the provincial side).


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## MoneyGal (Apr 24, 2009)

What SD said.


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## Dave (Apr 5, 2009)

I checked with my accountant and you guys are right. The only way to use up all the credits is to increase the dividends.


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## Guban (Jul 5, 2011)

This is anther example of the problem with the priority of credits on Schedule 1. You are forced to claim them in the order they appear. It sometimes would be nice to defer the tuition claim or interest on student loans to another year and use up the credits that can not be carried forward (dividend tax credit, foreign tax credit, overseas employment tax credit, ...). Wasting these credits can effectively cost many thousands of extra tax dollars paid over a couple of tax years if the tuition credits are substantial. :frown-new:


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