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I am filing taxes in Ontario, Canada, using simpletax.ca which has been a super useful platform. I am struggling to understand how it is calculating my refund, however.

From 2013, I have $16,473 in unused education federal amount, and $14,620 in unused provincial amount.

This amounts to $3,208, as it takes my (federal amount * lowest marginal federal tax-rate) + (provincial amount * lowest marginal provincial tax-rate).

I have seen online that that is how the unused education carryover is handled, but from descriptions of it, shouldn't it be wiping out my entire taxes payable that is deemed as refundable? And if it is just taking the lowest marginal tax-rate to calculate refund amounts, doesn't this mean I will just keep getting a smaller and smaller carryover amount, but never fully using it up?

Any insight on the matter is much appreciated!

EDIT:

I have filled out my info using the example below as a guide:

Assume Income of      61000
Fed. Taxes owed       10,343

Basic Personal Amount 11138
CPP Contributions     2425
EI Premiums       913
Canada Employment Amt 1127
Total:                15604
Multiply by 15%       2340

Basic Personal Amount 11138
CPP Contributions     2425
EI Premiums       913
Canada Employment Amt 1127
Tuition Credit        16473

Total:                32077
Multiply by 15%       4811

I am getting deducted the 2340 amount - shouldn't it be 4811?

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Yes, it should be using your federal tax credit to reduce the federal taxes you owe, and the provincial credit to reduce the provincial taxes you owe. However, if you didn't have to pay any federal tax, or already have enough other tax credits to cover the federal tax, then the tuition credits can be carried forward to use in the future. Same goes with the provincial ones.

I've never used simpletax.ca, but if you can see the forms, check the calculation for line 404 (line 48 of Schedule 1). This is how much you owe the feds based on your taxable income, before credits are applied. Now look at the first page of the Schedule 1, and look at the various non-refundable tax credits that were claimed. You can see on line 323 (line 25 of Schedule 1) how much of your federal tuition credit was claimed by the software. The total of all these non-refundable tax credits is multiplied by 15% and then deducted from your taxes owed. But the "non-refundable" part means that they are useless if you already have enough to bring the taxes owed down to zero. Most of these credits cannot be carried forward, but the tuition amount can. Therefore, the software should be smart enough to use all the non-carryable non-refundable tax credits first, and then if that isn't enough to cancel out all your taxes owed, then it will claim just enough of the tuition amount to bring the taxes owed down to zero.


Here are some examples that might help you understand how it works:

Assume income of $20000
Fed. Taxes owed: $3000

Non-refundable Credits

Basic Personal Amount: 11138  
CPP Contributions:       900  
EI Premiums:             376  
Canada Employment Amt:  1127  

Total:                 13541  
Multiply by 15%         2031  

So in this scenario, where no tuition amount is claimed, you would have $2031 worth of credits to offset the $3000 worth of taxes owed. The software would therefore try to claim some of the tuition credit:

Basic Personal Amount: 11138  
CPP Contributions:       900   
EI Premiums:             376   
Canada Employment Amt:  1127  
Tuition credit:         6459  

Total:                 20000  
Multiply by 15%         3000  

Now you have exactly $3000 credit to fully offset the $3000 taxes, by using up $6459 of your federal tuition credit, leaving you with $10014 to carry forward for future years. Every year that the software needs to claim some of it will lower the amount of credit that carries forward, until it is all claimed. Exactly the same thing happens at the provincial level, just using provincial tax rates instead of federal.

  • Thanks for taking the time here Elbyron, it is much appreciated. I have edited my question - let me know if I'm looking at this properly? I am getting a 2340 return calculated as a deductible from my carryover amount, shouldn't it be 4811? Thanks again, it is much appreciated! – ploo1990 Mar 4 '15 at 19:48
  • So basically what you're saying is that simpletax.ca is not claiming any tuition amount at all on line 323? In that case, are you sure the T2202A data has been entered in the "Tuition, Education, and Textbook Amounts" section, or if it was a carry-forward, that last year's unused amount is specified in that section? – Elbyron Mar 4 '15 at 23:50
  • It is claiming a tuition amount on line 323: 16473. I can see that calculation of 4811 showing up in line 350 (total federal non-refundable tax credits). This gives me a net federal tax of 5531, but I owe nothing, and the refund that is yielded from my federal carryover amount is 2470, doesn't cover all 5531. – ploo1990 Mar 5 '15 at 14:12
  • Your refund is generally calculated as: Net federal tax + net provincial tax - tax deducted from paycheques = refund. There are a few other uncommon things that can affect it too, but basically that's it. If the total taxes you owe are lower than what was deducted from your pay throughout the year (box 22 on T4), then the calculation produces a negative number and the CRA owes you a refund. So it sounds like your tuition amounts are being used properly, but you didn't quite pay enough tax out of your paycheques and so you don't get the full $4811 refund. – Elbyron Mar 5 '15 at 17:08
  • Right, for me that is 5531 + 3141 - 11881 = (-3,209), which is my refund amount listed - I guess I thought it would work out to having less net payable amounts given my unused education carryover amounts. Thanks for your help Elbyron! – ploo1990 Mar 5 '15 at 17:54

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