What Dentists Need to Know About Using Tuition Credits…
Bottom Line: Use Em If You Got Em!
In the recent tax court case of Zhang v. Her Majesty The Queen, 2017 CarswellNat 7397, the Tax Court of Canada had to interpret the law when it came to a dentist using OR deferring the use of their education and tuition tax credits. So Dr. Hui Zhang had accumulated $52,040 in tuition and education tax credits. Dr. Zhang COULD use them for her 2014 tax year; in that year, she earned dividend income from her professional corporation. She decided NOT to use any tuition and education tax credits that year. So she figured she could use them (carry forward) in 2015. And that’s what she did: when she filed her 2015 tax return, she claimed $52,040 in tuition and education tax credits. But the CRA (Minister of National Revenue) DENIED HER CLAIM!!! According to them, she didn’t have any credits because they had been applied in her 2014 tax year. Dr. Zhang took the CRA to court.
The Tax Court of Canada looked at section 118.61(1) of the Income Tax Act, which contained a formula for determining the amount by which an individual’s unused tuition, textbook and education tax credits are to be determined. In 2013, that section said you need to use this formula:
A + (B – C) – (D + E)