Does tuition carry forward have a limit on tax deductions?

I am getting confused about the tuition carry forward. My understanding was that the tuition tax credit can reduce your taxes owed to zero dollars, and will carry forward in the next year until there is no credit left. However, my tuition credits carried forward from last year were about 9k and my taxes owed for this year was about 8k--yet I am showing that I will be recieving a 1k return--not 8k. Am I misunderstanding? Mis-inputting? Or is this a TurboTax error?

Thanks!

Seniors and students

The amount of your refund is based on how much you have paid towards your taxes throughout the year, compared to your tax liability.  If you are able to confirm that the tax liability is equal to zero, then the tuition credits have been included correctly.  If such is the case, and you hadn't included the tuition credits, then you would have had a balance due on your tax return.

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Seniors and students

Thanks @TurboTaxJeffrey -- so to be clear-- if I had paid 8k in taxes for 2017 (automatically removed from pay) and I apply my tuition credit (9k), I should be refunded 8k?

Seniors and students

No, not necessarily.  Your tax liability is determined by your income, subtracting certain deductions, and applying applicable credits.  Once you have your tax liability, you then compare this to your refundable tax credits, which for most taxpayers is the amount withheld from their pay for tax purposes.  If the amount withheld is greater than the tax liability, then you get the difference back as a refund.  If the amount of refundable tax credits is less, then you owe the difference.  If you were able to bring your tax liability to zero, and you paid $8K, then you would be refunded the full $8K.

Seniors and students

If your tax liability before applying the tuition credits was $17K, then the $9K in credits would bring the tax liability down to $8K...and result in neither a balance due or a refund on your tax return.

Seniors and students

@TurboTaxJeffrey Okay.. So do tuition credits have the ability to bring your liability down to zero? Better yet, would 9k tuition credits be able to bring my 8k liability down to zero? When I remove the tuition carry over from my TurboTax application, my refund turns to $50. So my 9k tuition credits is reducing my liability 1k. Shouldn't it have a greater affect?

Seniors and students

You say you are showing a refund of $1K.  This means that your tax liability before applying the tuition credits was $16K.  You then apply the tuition credits, lowing the tax liability to $7K, and when you compare that to the $8K that was deducted all year, it means you overpaid by $1K, which is your refund.

Seniors and students

Ahh...remember, non-refundable tax credits are multiplied by the lowest tax rate, and THAT is your reduction in taxes.  Federally, that means that $8K actually reduces taxes by 15% of 8K, or an actual tax savings of $1200.  The provincial reduction will of course depend on what province you reside in, and the lowest tax rate there.

Seniors and students

Ohhh. Okay, I understand now. Thank you @TurboTaxJeffrey !