|
|
Archived
Tax Columns
Click on the headline to view article.
|
Moncton Times & Transcript ~ Tax Help Plus ~ Expensing Education ~ September 5, 2006 - 17 Sep 2006 by TaxHelp
|
The last, long weekend of the summer – Labour Day. Sure there’s still time to find our way to Parlee but turkeys will be in the oven before you know it.
Speaking of labour, I took our son Rob to Dalhousie on the weekend. That’s the school and not the place. The only place it feels like we’re going is the poor house with both the kids away at school again this fall, as Jenn also finds herself at university for the sixth straight September.
Like most parents, I keep hoping the political parties are going to offer free tuition and forgivable student loans. Of course, that’s a Technicolor dream. In the meantime, there is assistance available for funding a post-secondary education, courtesy of the federal and provincial taxing authorities. You might be interested in some of these well appreciated deductions, credits and rebates.
First, while you may feel right about paying the whole year's tuition (and perhaps residence and meal plan) up front, you will only get to claim the portion allocated to the end of 2006.
Tuition is the only direct cost available for tax-credit purposes. Other costs fall into a catch-all category referred to as the education amount. The official dollar value is reported on a T2202A Tuition and Education Amounts Certificate. After the student is finished school and repayment of student loans begin, the interest at that time will also qualify for credit.
As a result of the last federal budget, bursaries and scholarships generally are non-taxable. This has been bumped up from a $3,000 exemption limit. The budget also introduced a textbook tax credit worth $65 per full-time month of study and $20 per part-time month. For those kids studying in urban areas (as well as regular taxpayers), the cost of a monthly bus or other form of transit pass now generates a tax credit (as of July 1, 2006). As well, the education amount – a theoretical value designed to factor in costs such as room and board – is worth $400 per full-time month and $120 per part-time month in a qualified program for the 2006 tax year.
Next spring the new provincial Tuition Tax Cash Back Credit Act will kick in. Students who paid tuition in 2005 and beyond will be eligible to claim a refund of 50 per cent of their tuition against their tax bill (to a maximum of $2,000 in any given year and with a cumulative ceiling of $10,000). The student will have 20 years to take advantage of this program. This creative and welcome initiative is in addition to any other tax credits available, and will be beneficial to most students and future former students who pay tax to Fredericton.
So what happens next spring and you’re a parent looking longingly at your child’s tax receipt? First, you can't have the credits until your loving progeny has done his or her tax return. This is probably the most common error we see in our offices. Parents show up with the T2202A and believe they can use the whole thing. Unfortunately, this is not the case. As a result, many firms like ours process student returns for a nominal fee, when preparing the parent's return. This assures the parent of having the correct maximum amount of credit available for transfer.
Students must prepare their return and use whatever credits are available first to lower their taxes to zero. This is accomplished by taking the taxable income at line 260 and then subtracting the sum of the credits on lines 300 through 318.
The balance if it is positive is then subtracted from the total tuition and education credits. The maximum transferable amount is $5,000, less the amount needed to reduce the above balance to zero. If the balance is negative, the value of the credit is transferable up to a maximum of $5,000. Finally, this calculation is done for each student child, so, ouch, a parent with three kids in university could claim up to $15,000. (Of course, the student might also choose to carry forward the full credit for their own personal use at a future date, but this rule does not officially apply in our house.)
A couple of last points. Tuition fees are only eligible as a tax credit if they are in excess of $100 to a single institution. Two courses of $75 each to NBCC qualify for $150 in credit while $100 to U de M does not. And finally, keep in mind that moving expenses to go to school full-time (40 kilometres or greater) can in some situations be a deduction.
I wonder if the neighbourhood kid is suspicious as I question him about how much he makes delivering papers?
Roger Haineault is with Help 4 Taxes. His column "Tax Help Plus ..." appears each Tuesday. For questions, comments or column suggestions he can be reached by calling 855-HELP (4357) or by emailing roger@help4taxes.ca |
|
|
|
|
