Lawstudents.ca

For every $6 tuition, you get $1 back late.

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aznLaw 24 Apr 2011

When I finished my undergraduate degree as an international student in Engineering, I had $60,000 of "unused tuition, education, and textbook amounts available to carry forward to a future year". In the past four years, I received $9000 in tax return. I still have $10,000 unused tax credit left.

So I guess the same thing would apply for law students. If you pay $60,000 tuition fees over four years, you will get $10,000 back in tax return when you work.

Can anyone verify this?

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SchOZ 24 Apr 2011

Wouldn't it matter what your tax rate is?

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sonandera 24 Apr 2011

It all depends on how much tax you pay, and how much your eligible tuition amount is. Take the following examples:

1) You make $25,000, have $6,000 deducted in tax, and have $15,000 in eligible tuition. In this case, your first $10,000ish is tax free, then the next $15,000 is your tuition deductible, so you have $0 in taxable income. That means you get $6000 back

2) You make $35,000, have $10,000 deducted in tax, and have $15,000 in eligible tuition. Again, your first $10,000ish is tax free, then you deduct $15,000 of tuition, and you have $10,000 left in taxable income. Then you're at 15% on that $10,000, so you would get an $8,500 return.

**This is not intended as tax advice, make sure that you consult a professional for tax advice **

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sonandera 24 Apr 2011

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aznLaw 24 Apr 2011

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uofalaw 24 Apr 2011

It all depends on how much tax you pay, and how much your eligible tuition amount is. Take the following examples:

1) You make $25,000, have $6,000 deducted in tax, and have $15,000 in eligible tuition. In this case, your first $10,000ish is tax free, then the next $15,000 is your tuition deductible, so you have $0 in taxable income. That means you get $6000 back

2) You make $35,000, have $10,000 deducted in tax, and have $15,000 in eligible tuition. Again, your first $10,000ish is tax free, then you deduct $15,000 of tuition, and you have $10,000 left in taxable income. Then you're at 15% on that $10,000, so you would get an $8,500 return.

**This is not intended as tax advice, make sure that you consult a professional for tax advice **

That's not how it works. Tuition is a tax credit, not a deduction. That means that all your tax credits get added together, multiplied by a percentage (I can't remember how much--18%?), and that amount is subtracted from the amount of tax payable on your income. Repeat this for provincial tax. But at the end of the day, you'll get about 1/6 back, assuming you

have earned enough income.

For comparison purposes, RRSP contributions are deductions (and would fit into what Sonandera has described above). Those are subtracted directly off your income, which reduces the amount your tax is calculated on. IIRC, on deductions get you about 25% back.

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nuberific 24 Apr 2011

That's not how it works. Tuition is a tax credit, not a deduction. That means that all your tax credits get added together, multiplied by a percentage (I can't remember how much--18%?), and that amount is subtracted from the amount of tax payable on your income. Repeat this for provincial tax. But at the end of the day, you'll get about 1/6 back, assuming you have earned enough income.

For comparison purposes, RRSP contributions are deductions (and would fit into what Sonandera has described above). Those are subtracted directly off your income, which reduces the amount your tax is calculated on. IIRC, on deductions get you about 25% back.

This is correct. You will have a tax credit from all the tuition you paid, in addition to a set amount given to you for each month you are enrolled in school. The real life value of the tax credit is 15% federally, and 5.05% for Ontario - 20.05% together (but don't quote me on these numbers!). Therefore, if you live in Ontario, a $10,000 tax credit is really worth $2005 in taxes you don't need to pay. This will not change if you are making $25,000 a year or $250,000. If you do not make enough money in a year to use it all, you can carry the tax credit forward for use in future years or transfer a limited amount to your guardian(s) or spouse.

So you actually get back more than 1/5 of what you pay in tuition when you include the additional credits they give you for being enrolled in school.

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sonandera 24 Apr 2011

See, good thing I put the disclaimer in there! I reread the appropriate documents and nuberific and uofalaw are correct. My explanation was for deductions not tax credits. Rechecked my taxes though, and I did 'em right!

Edited by sonandera, 24 April 2011 - 09:16 PM.

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Diplock 25 Apr 2011

It's true that as a tax credit the education amount will mean the same thing regardless of tax bracket, but if I recall it's a credit that goes into the equation very very early. Meaning you can be forced to burn the credits for effectively no reason if you have other potential tax offsets that would kick in later, but you don't get there until after you've used your education credits to reduce it all to zero.

So yes, it's the same credit regardless. But all the same, it could mean very different things for different people.

Note: Also not meant to be taken as tax advice. I am not a tax lawyer, I'm just a guy who pays attention to my own taxes.

Source: lawstudents.ca

Category: Taxes

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