How does the tuition tax credit work?

Here is the general break-down of how it will work:

- Unused education amounts are entered on your income tax return as a carry forward amount and they will reduce your taxable income to zero.

- Once your income has been reduced to zero, your unused amounts will continue to be carried forward until they are used up.

- Because your taxable income is zero, you will probably end up with a refund on any tax that you have paid for the year.

If you would like to see the specific calculations of how that calculation will work on your income tax return, take a look at the Schedule 11 form.

Here are the details of Schedule 11: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtr...

Because you know that you have a large amount of education credits to reduce your taxable income and will most likely get a refund, you can choose to pay less tax at source (i.e. your pay cheque) by filling out a TD1 form and giving it to your employer.

The TD1 form allows you to tell your employer how much tax you'd like to take off your pay cheques based on your anticipated income tax situation. The benefit of reducing your tax at source means you'll pay less tax during the year and have more money in your pocket. Not updating your TD1 form will mean that you'll be paying that tax through the year, and will just get a bigger refund at tax time.

You had better worry about the 1098T. The school must qualify or you cannot take a tuition credit. If the school does not qualify for FAFSA it does not qualify for the credit. The AOC credit is an expanded Hope Credit so no Hope Credit right now. The AOC has 2 parts. One part reduces your taxes and one part is refundable. Sounds like you do not qualify for the credit.