Transfer of education credits – effect on the family tax cut
Notice to the reader
This measure has received Royal Assent.
Changes to the Family Tax Cut were announced in Budget 2016 under Income Splitting Credit.
For the 2014 and later years, Budget 2015 introduces a change to how the family tax cut is calculated to allow a transfer of the tuition, education, and textbook amounts from an individual to their spouse or common-law partner. This will ensure that the affected taxpayers receive the appropriate value of the family tax cut.
1. What is the family tax cut?
The family tax cut was announced October 30, 2014, and is a new federal non-refundable tax credit of up to $2,000 for eligible couples with minor children. It is based on the net reduction of federal tax that would be realized if up to $50,000 of an individual’s taxable income was notionally transferred to the individual’s eligible spouse or common-law partner. Refer to the Family Tax Cut for more information.
2. Currently, how do non-refundable tax credit amounts transferred from a spouse or common-law partner affect the calculation of the family tax cut?
When up to $50,000 is transferred from an individual to their eligible spouse or common-law partner, the spouse or common-law partner may be able to claim otherwise unused federal non-refundable tax credit amounts, including unused amounts that they transferred to the individual. Therefore, these transferred non-refundable tax credit amounts are not allowed to be claimed by the individual in the calculation of the family tax cut, to prevent double counting of the credits. However, due to rules for calculating the tuition, education, and textbook amounts as shown on Schedule 11, Tuition, Education and Textbook Amounts, the double-counting issue does not occur for transfers of unused tuition, education and textbook amounts.
3. How does Budget 2015 change the family tax cut calculation?
For the 2014 and subsequent years, Budget 2015 introduces a change to how the family tax cut is calculated, to allow a transfer of the tuition, education and textbook amounts to an individual from their spouse or common-law partner. This will ensure that affected taxpayers receive the appropriate value of the family tax cut.
4. Should I ask for an adjustment to my 2014 tax return?
The Canada Revenue Agency (CRA) will automatically reassess taxpayers now that Royal Assent has been received, where it is apparent that they are entitled to an increased amount of the family tax cut for 2014. You won’t need to ask the CRA for an adjustment.
Your spouse or common-law partner may have decided to carry forward unused tuition, education, or textbook amounts instead of transferring them to you. If you and your spouse or common-law partner decide to request a reassessment to allow for the transfer of these credits, the transfer of the credits will be recognized for the purposes of the family tax cut now that Royal Assent has been received.
5. Where can I get more information about this change?
The CRA is committed to providing taxpayers with up-to-date information. The CRA encourages taxpayers to check its webpages often. All new forms, policies, and guidelines will be posted as they become available.
In the meantime, please consult the Department of Finance Canada's Budget 2015 documents for details.