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  • Calculating net cost

    We went to the lawyer to figure out costs for post secondary and he was able to do it via divorcemate software with the tax benefits removed. Partner is hoping to have a job by November and will recalculate the amount to provide the extra % based on his new income (hes on EI right now and a job will increase the money and % owed). But how do we figure out the taxable benefit without the legal software? We had no idea how much of a taxable benefit it was for mom so we want to make sure its right.

    Has this been discussed before? Anyone know where to find info other than doing a mock tax return?

  • #2
    Originally posted by rockscan View Post
    We went to the lawyer to figure out costs for post secondary and he was able to do it via divorcemate software with the tax benefits removed. Partner is hoping to have a job by November and will recalculate the amount to provide the extra % based on his new income (hes on EI right now and a job will increase the money and % owed). But how do we figure out the taxable benefit without the legal software? We had no idea how much of a taxable benefit it was for mom so we want to make sure its right.

    Has this been discussed before? Anyone know where to find info other than doing a mock tax return?
    Post secondary is a tax deduction to the student first. Anything left over can be transferred to the parent.

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    • #3
      Lawyer calculated student portion based on her contribution. So the remaining came off parents split which is why Im confused. Its easy with the software but that means a $300 bill from the lawyer. Thought if there was a calculation to avoid it, he could save some money.

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      • #4
        Originally posted by rockscan View Post
        Lawyer calculated student portion based on her contribution. So the remaining came off parents split which is why Im confused. Its easy with the software but that means a $300 bill from the lawyer. Thought if there was a calculation to avoid it, he could save some money.
        Whether there is anything to transfer to either parent will depend solely on the student's income. Without knowing that, how could there be a calculation of the remaining tuition funds to any parent?

        Transferring and carrying forward amounts

        It's irrelevant who paid the tuition and in what percentage. The entire deduction is to be taken by the student first.

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        • #5
          Thats strange. It says only $5000 can be transferred but the taxable benefit calculated by the software was over that. And kid had very little income rendering the tuition credit little benefit to their taxes.

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          • #6
            Originally posted by rockscan View Post
            Thats strange. It says only $5000 can be transferred but the taxable benefit calculated by the software was over that. And kid had very little income rendering the tuition credit little benefit to their taxes.
            One good reason not to get financial advise from a lawyer!

            Seriously though, these CRA nuances don't seem to be in the knowledge base of many family lawyers, although they should be.

            CRA has managed tuition deductions this way (except for the carry forward, that's new) since I was a post secondary student in 1989. My parents could only deduct what I could not.

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            • #7
              Originally posted by rockscan View Post
              Thats strange. It says only $5000 can be transferred but the taxable benefit calculated by the software was over that. And kid had very little income rendering the tuition credit little benefit to their taxes.
              Unfortunately it doesn't matter if it renders any benefit to the student's taxes, this is the way the deductions have to be taken.

              The carry-forward method is the most tax conservative method moving forward. If the student can carry forward overages year to year, their first year of income could be not taxable at all, or very little tax. All that could potentially help them immensely with student loans, etc.

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              • #8
                Yes my accountant friend told me its more beneficial for her to carry forward all tuition until after graduation but theres no reasoning with her right now. Anything dad suggests, if its not in moms benefit, kid wont agree. But then the other factor is mom has never claimed any tax deductions on her taxes since the divorce. So we were hesitant to include tax deductions but divorcemate calculates it all, cs included so thats why we went with that. But when his % goes up he wants to do retroactive pay for the post secondary costs.

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                • #9
                  Originally posted by MS Mom View Post
                  Post secondary is a tax deduction to the student first. Anything left over can be transferred to the parent.
                  We just did this last year, and I concur, we too were advised the deduction went to the kidlet. I can't imagine a parent arguing over the extremely minor tax benefit on postsecondary tuition, in lieu of moving the kid ahead a bit in tax time when the kid has to ante up. We try to give kidlet every advantage, if she works hard.
                  Start a discussion, not a fire. Post with kindness.

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                  • #10
                    I didnt ask so we could screw over anyone. All s7 expense calculations are net cost. We're trying to do this right, hence the go back and recalculate to provide more when income levels change--even if that happens in January or February. Hes dealing with a kid who doesnt think they should have to pay anything, who tells him he should use all moms money he STOLE to put her through school. Hes trying to be consistent with all costs and we were a little surprised at how the legal software calculated it.

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                    • #11
                      Originally posted by rockscan View Post
                      Yes my accountant friend told me its more beneficial for her to carry forward all tuition until after graduation but theres no reasoning with her right now. Anything dad suggests, if its not in moms benefit, kid wont agree. But then the other factor is mom has never claimed any tax deductions on her taxes since the divorce. So we were hesitant to include tax deductions but divorcemate calculates it all, cs included so thats why we went with that. But when his % goes up he wants to do retroactive pay for the post secondary costs.
                      If your accountant friend told you it was more beneficial to carry the deduction forward, why did you seek advice from a lawyer? I'm not sure why your accountant friend didn't include this very basic CRA information in the advise in the first place? You can't know about carry-forward and not know that the child takes the tax credit.

                      Trying to take into account everything before anything happens isn't productive at all. The "child" is an adult, and doesn't have to follow dad's suggestions or mom's. It's pretty much up to the adult child whether to transfer this credit or carry it forward. Perhaps the child is better versed in tax rules than the parents and isn't doing things to "spite dad", but because they're correct?

                      When his percentage of the post secondary costs changes based on his income, then he increases/decreases the payment. All this pre planning based on what-ifs is fruitless.

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                      • #12
                        No shes already stated she'll give everything to mom and to stop telling her anything. The lawyer just calculated everything including cs while away at school in the software and drafted the letter. When he gets a job and amounts go up he'll go back with the number but not take into account the tax like other s7. If mom ends up claiming he'll deal with that for next year.

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                        • #13
                          It seems like that you are arguing over if a very little amount. Most likely less than you are paying a lawyer to draft letters. Maybe the reason daughter is acting that way is because Dad keeps bugging her about it.

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                          • #14
                            No thats not the case. I asked a question about calculating the net cost. The lawyer told us one thing and I was asking about it here. I got my answer and the cost will be recalculated accordingly when income goes up. And the letter included a response to a bunch of things including post secondary. Dad doesnt bug her about anything. Daughter called to rant at him about having to pay part of tuition cost when she felt her parents should pay all of it and he should give her moms money back.

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                            • #15
                              An idea that some people follow up with, if the parents have a good relationship:

                              Take the amount of tuition and divide it pro rata based on income.

                              Next year, when you disclose your income tax returns (as you should), you see the tax benefit from the schooling. The parents agree that any tax credits are shared equally (ie, whoever got them pays half to other parent) and deductions are shared as at the average tax rate for that parent.

                              It relies on a spot of honesty (and perhaps tax return literacy) from both parents, but is doable for some people without needing calculations in advance (since you share the benefits as you receive them).

                              It can also be helpful if the parents use the same accountant to help them maximize the tax benefits.

                              Comment

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