John Wick graduated from Concordia in December 2023 in engineering. In January of this year, he joined an organization to examine the environmental impact of the hydroelectric development in northern Quebec. His first-year gross salary is $110,000. During his three years at Concordia, he never filed a personal tax return but will be filing his first Federal and Quebec returns in 2024. John did not work in the summer as he always took courses. His entire family lives in England, so he has never transferred any of his tuition amounts. His best friend Keanu advised him to file his 2021, 2022, and 2023 tax returns to lock in the tuition amounts to carry the amounts forward to use in a future year, such as on his 2024 tax return. Below is John’s official T2202 tuition tax form that he just received from Concordia in February 2024 for the 2023 tax year. When he checked for the T2202 for the previous years, he saw that 2021 and 2022 were the same amounts of $5,900 as the tuition had not increased.
a) Underline and highlight your response. (.5 marks for .25 marks each)
When John files his 2024 personal income tax returns, the maximum he could claim is $______________ ($0 or $5,900 or $11,800 or $17,700) in tuition but to do so, he must go back to previous years and file his _______________ (2021 or 2022 or 2023 or all three years) tax returns.
b) The tuition tax credit amount is calculated by multiplying the tuition you paid by the rate of the lowest federal tax bracket. Using Table B, and based on your response in a), what is John’s 2024 tuition tax credit? (.25 marks)
Show calculations: (.25 marks)
c) In general, students can transfer their tuition to their father or mother, but as John’s parents live in England and they do not file Canadian Federal and provincial tax returns, it would not make sense for John to transfer this valuable tuition tax credit to them.
John does, however, have a girlfriend. She has been working throughout 2023 and could really use this tax credit to reduce her taxes. They started seeing each other in November 2023, just before John landed the job in northern Quebec, so they had not yet moved in together. How much of his tuition could he transfer to his girlfriend for her to use on her 2023 Federal tax return? (.25 marks)
$____________________________
a) When John files his 2024 personal income tax returns, the maximum he could claim is $17,700 in tuition but to do so, he must go back to previous years and file his all three years tax returns.
b) John's 2024 tuition tax credit would be calculated as follows:
$17,700 x 15% = $2,655
c) John could transfer the full $17,700 of his tuition to his girlfriend for her to use on her 2023 Federal tax return.