| |
|
Fredericton Daily Gleaner ~ Capital Appreciation ~ School Costs ~ August 28, 2006 - 17 Sep 2006 by TaxHelp
|
It’s enough to make someone feel busticated.
For the sixth straight fall (yes, sixth), our daughter Jennifer is headed off to school. Not content to sit on her New Brunswick degree, she now feels it’s time to try the post-secondary system in the United States. Even without factoring in our help, she’s probably going to be looking at some $75 grand in debt when all of this is over. Hopefully, she either has a vision of some lottery numbers that are going to pay off big or she will land a job that will give her a chance to pay down an amount that many of us and our fathers and mothers would never have had for a mortgage on our homes.
While I haven’t heard any of our election candidates offering a free university education, there are a number of areas of tax relief that help take the sting out of the cost.
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 UNB 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.
Looking for someone to cut your lawn or shovel your driveway?
Roger Haineault is with Help 4 Taxes. He can be reached by email at roger@help4taxes.ca or by calling 1 (888) 450-1212. His column appears Mondays.
|
|
|
|
|
Home | About Us
| Ask a Question | Latest
Tax Column | Form T1013 | Links
| Contact Us |
|
|
 |
