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[H&R Block Insight - August 2008]
[Claiming Credits for Universities Abroad]

One of the benefits of being student is the ability to take advantage of a number of tax credits. It may not be the only reason to pursue post-secondary education, but at tax time, it can help reduce your tax payable.

The tax credits also extend to students who are attending universities outside of Canada. The student must have been in full-time attendance in a course of at least 13 consecutive weeks that leads to a degree.

According to the Income Tax Act, an educational institution located in a country outside of Canada is presumed to qualify for tax purposes if it is recognized by an accrediting body as being an educational institution which confers degrees at least at the bachelor or equivalent level.

Usually, this can be confirmed by calling the university or checking out their website. But the Canada Revenue Agency (CRA) relies on a list of recognized institutions outside of Canada at each of its tax services offices. This list is updated regularly and provides the guidelines for taxpayers who claim tuition and education amounts while at a foreign school.

The list can be incomplete. Recently a taxpayer had to take his claim all the way to the Tax Court of Canada to secure his tuition credit. He completed courses at the prestigious London School of Economics which certainly meets the criteria outlined in the Tax Act. However, the school was not on the CRA list.

Considering that the London School of Economics has been attended by 14 Nobel Laureates and 39 heads of State or heads of Government - including two Canadian Prime Ministers - it was surprising not to have it listed. For universities outside of Canada, they can request to be placed on the list if they meet the requirements.

If you are a student taking classes at a foreign university, you will need a Form TL11A completed by the institution in order to claim your tuition and education amounts on your tax return. And if you confirm your school qualifies, but is not on the list, you can ask the CRA to review your claim.

 

[Relief for Working Seniors]

A recent survey by the Royal Bank of Canada showed that 60 percent of Canadians have a new outlook on what retirement could mean. Twenty-two percent of older Canadians said they plan to phase-in retirement gradually and 26 percent said they would retire and work on a contract basis.

For seniors choosing to remain in the workforce, there is some good tax news. Starting July 1, 2008, the amount of employment income that a senior can earn before it affects their Guaranteed Income Supplement (GIS) has increased to $3,500 from $500. This means a senior who is single and collecting Old Age Security (OAS) can earn $3,500 or more to keep up to an additional $1,500 in annual benefits. Before this change, every dollar earned over $500 triggered a 50 cent reduction in GIS.

Seniors who exceeded the old exemption in 2007 should see an increase in their July 2008 payments. The Federal government estimates approximately 100,000 seniors who are working and collecting the GIS or Allowance will feel the benefit on this change.

In addition, people who pay their taxes in quarterly instalments directly to the Canada Revenue Agency will be enjoying an increase to the limits. The last Federal budget introduced a change to the calculation of instalments. Most Canadians have their income tax deducted at source but for self-employed individuals and retirees, they pay their taxes in instalments on a quarterly basis. The CRA bases the quarterly instalment payments on the previous year's tax return. If a taxpayer has had to pay more than $2,000 in taxes in two of the last three years, the CRA requests instalment payments.

With the new calculation, only those taxpayers who exceed $3,000 will be required to pay quarterly instalments. The instalment payments are scheduled for March 15, June 15, September 15 and December 15 each year.