How much of my $5K/yr tuition tax credit ought I transfer to my mom who earned $40K/yr?

Question

1. From 2009-2015, I was studying in universities, and earned no income. My parents paid all my tuition. We all live in ON. I filed my taxes, but didn't know about claiming tuition tax credits. I would've qualified for $750 (= $5000 x 15%), the maximum. These comments counsel that I can amend my mom's and my tax returns in 2009-2015.

2. I can transfer them to only one person like my mom who earned only $40K yearly. "If you are transferring an amount to a designated individual, only transfer the amount this person can use.".

3. But how much of the $750 ought I transfer her?

4. Isn't it possible that transferring her the full $750 would waste these credits? u/bluenose777 commented "yes" essentially.

   If for some reason (high deductions and credits) she only paid $700 in federal tax you would only want to transfer 700/15% = $4666.67.

5. Here's my mom's 2009 return but edited for privacy.

Answer 1

First, for clarity the amount you are transferring is technically not '$750' [the net impact to taxes payable], you are transferring '$5000' [the gross amount of the tax credit].

So the question is, if you transfer $5,000 in tax credits to your mother, would she pay any Ontario tax? [Note: you must also transfer the federal tax credits separately - I assume you know this, but want to be sure you don't lose out on the opportunity there]

For a quick example: Current basic non-refundable tax credits are ~10k [they would be slightly different in prior years]. If someone earned $17k, then they would only have to pay tax on $7k of income. If you gave them a $5k deduction, they would only pay tax on $2k of income - so, none wasted.

Because your mother earned far more than the ~10k non-refundable personal tax credits, she should be able to use the full amount of your transferred credits each year.

I recommend that you first have your own returns amended, then wait for the CRA response confirming they reassessed your returns, then have your mother amend her own returns in a similar process [because she already filed her returns, she will need to use the 'T1-Adj' form], so she can claim the refunds back-dated to earlier years.

Answer 2

tl;dr you've read the tax brackets wrong.

Your third source states that in 2010, you should've paid 5.05% on the first $37,106 of taxable income to the Ontario government.

Your mother's taxable income of $35k puts her well into the first bracket. In all likelihood, your mother will be able to benefit from the full amount. To ensure this is the case federally, check that her total federal non-refundable tax credits (line 350) is less than $34250. To ensure this is the case provincially, ensure that her Ontario non-refundable tax credits (line 6150) is less than $34750.

(an initial version confused the tuition credit as a deduction instead of a credit -- the amount is given back at the first bracket rate if you have taxable income not covered by another tax credit)