My_question_is: Applicable to both US and Canada
Subject: US University Tuition distorting my alleged income on CDN
Income Tax
Expert: taxman at centa.com
Date: Tuesday May 30, 2006
Time: 01:12 PM -0700
QUESTION:
Hello,
I am attending a US university with a fellowship that provides me with a
living stipend and eliminates my need to pay tuition. I don't pay tuition
because my department does. The problem is that I am told by revenue Canada
that I must declare the (high) US tuition at this university as "other
income" along with my stipend, putting me in a tax bracket as a person
making over 55,000 CDN when in reality I only receive and live off around
16,000 CDN. My Canadian taxes, after using up my tuition credits and
foreign tax credit, are quite high as a result of this artificially high
income bracket. Is there anything in the dense thicket of the Income Act or
Canada-US Tax Treaty that alleviates the burden of some 30-odd thousand
dollars US in tuition on the tax payments coming out of a real income of
less than 15,000 US? I have no Canadian income and thus no deductions to
put against my net income. I am still deemed a resident of BC, Canada.
Thanks so much for your time.
-------------------------------------------------------
david ingram replies:
Since you have remained as a resident of Canada, you are subject to Canadian
tax and are then caught up in the tax credit versus deduction regime.
It would be the same if you were at UBC or Newfoundland however.
A $50,000 scholarship is taxable at full rates and a $50,000 tuition is only
worth a 23% or so tax credit. The difference is taxable in Canada.
If, and I say, "if" you had turned in your provincial medical and your
provincial drivers licence and expressed a desire to stay in the US after
graduation, you could likely have filed as a resident of the US. However, I
bet that you have your Canadian medical and licences etc, because you can
continue to use them on a student visa.
It is a conundrum.
Hope this helps.
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