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I have spent 5 years in Canada. The first four were as an international student whereby even though I did not have any significant or no income, I filed my taxes so that I could accumulate non-refundable tax credits (NRTCs) for all the tuition fees I was paying. At the end of the four years, this was a substantial amount (let's say $4x).

The past year, I worked full time and had federal and provincial tax deducted at source (this amount is $x).

Based on the information answer provided here, it seems clear to me that since my NRTCs are 4 times the tax deducted at source, the following should occur when I file my next tax return:

  • I should receive $x as part of a tax refund
  • My NRTCs should become $3x

Have I understood the system correctly? Since $x is a substantial amount, I want to know if I can factor this in as money that will be coming in.

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You're partially correct, at least in my understanding of this. Yes, the tax credit can be carried forward to future years, but since it is non-refundable it will reduce your tax liability solely. Depending on your tax situation this may result in a bigger refund or it may not.

In an example,

If you've had $3K withheld from your paycheck toward your income tax and this is also an accurate reflection if your tax liability then taking the NRTC would reduce your tax liability enabling you to be eligible for a refund (due to having already pre-paid more tax than you're liable for).

  • In other words, if I have $3k liability and $3k tax deducted at source and $3k NRTC, I should be paying nothing to the government and getting back $3k that was deducted at source? – karancan Jan 16 '14 at 20:40
  • @karancan Correct. – Frazell Thomas Jan 16 '14 at 20:54
  • I have posted my answer based on the results of filing my taxes – karancan Feb 28 '14 at 4:48
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I have now filed my taxes and am able to report back with precisely what took place.

To summarize, my situation was the following (before filing taxes):

  • $4x of available unused non-refundable tax credits acquired through tuition amounts
  • $x tax deducted at source

As it turns out, if I have $4x of NRTC's, it is not $4x that I can redeem. It is 15% of $4x that I can redeem to be able to get a tax refund.

For the sake of simplicity, let's say I have $10x NRTC's instead of $4x NRTC's. That gives me $1.5x as the actual redeemable amount.

I will get $x back on my refund since I have $1.5x available.

Have I understood the system correctly? Since $x is a substantial amount, I want to know if I can factor this in as money that will be coming in.

In summary, the only thing I didn't know before filing my taxes was the 15% rule!

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