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Opinion

Budget 2019 – Don’t spend your new Canada Training Credit just yet

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  • On March 19, 2019, the federal government tabled its election-year budget. One of the new provisions is a refundable credit called the Canada Training Credit. However, the $250 credit won’t even be available until you file your 2020 income tax return in April of 2021.

    Further, if you are born in 1995 or later, you won’t qualify yet. If you were born in 1954 or earlier, you would never be eligible.

    In addition, the maximum benefit you can receive is $5,000 in a lifetime (which will take 20 years to get at $250 a year) and the benefit can only be used to a maximum of 50% of eligible tuition costs.

    So let’s consider the following scenario:

    It is 2019 – you are 25 years of age making $27,000 a year and file your taxes every year.

    You decide to take advantage of this credit and enroll in your first semester of schooling in the fall of 2023.
    According to Statistics Canada, the average Canadian undergraduate pays $3,419 per semester.

    So, you take time off work to go to school full-time in the fall, thus reducing your income by 1/3 in the year to $18,000.

    Under the current 2019 rules, you would only have $39 in federal income tax. This amount is low because the tuition credits reduce your taxes.

    By 2023, you have built up a “pool” of $250 per year after you turned 26, and believe you have a $1,000 pool available for that year.

    When you file your 2023 return the $1,000 is triggered as a refundable tax credit. But you won’t be getting $961 back ($1,000 – 39).

    Here’s the catch:

    The $1,000 pool reduces the amount you can claim for tuition credits as well, which changes the tax owing to $189 Federal income tax. Meaning the $1,000 pool that you waited for is reduced by 15% by the time you pay it out.

    Cash in jeans: $811.

    But what if the course you decided to go into begins in January of 2023? You go for the January-April semester, work from May-August, and attend school September-December.

    Using the same $27,000 – your income is now reduced by 2/3 while attending full time. Your income is only $9,000 as a result of the May-August period.

    Your tuition (possibly paid through student loans) is $6,838 for the year.

    Your tax is now zero because even before tuition credits you are below the Basic Personal Amount in your earnings.

    Does this mean you get the full $1,000?

    No.

    Because your income is less than $10,000 in 2023, you don’t get the $250 for that year. As such, you only get $750, and your tuition credits available for carryforward are reduced by $750 as well, thus having a future negative impact on tax of $112.50.

    Net result: $637.50 cash in jeans

    What if you are a parent that decides to stay home with the kids until they are in school full time and go back to school in 2023?
    Unfortunately, because you did not make more than $10,000 a year in any of the years, you get zero.

    What if you were laid off, collecting regular EI benefits, and decide to go back to school?
    Regular EI Benefits don’t qualify for the $10,000 income calculation. As a result, unless you had special EI benefits like parental leave or earned income from another source greater than $10,000, you don’t qualify.

    What if you were self-employed through a small business corporation and paid yourself dividends instead of wages and then decided to upgrade your training?
    Your dividend income does not qualify, and so you are not eligible for amounts to be added to the pool.

    So assuming you qualify, and you wait the four years to build up a pool of $1,000 (remember that the $1,000 is only a net $850 because of the reduction in tuition credits). That same Statistics Canada report says that tuition is increasing at 3.3% per year. That means by you waiting four years so you can get the Net $850 means your annual tuition has likely increased from $6,838 to $7,786 ($948).

    You waited four years, and the tax amount you receive won’t even cover the inflationary price increase on tuition.

    In Conclusion

    • Those that do qualify won’t see anything until April 2021; the actual net amount of what they will see is only $212.50; and their annual tuition will likely have increased by $225.65.
    • Students under the age of 25 will see nothing;
    • People over the age of 25 that don’t have more than $10,000 of income will see nothing;
    • Seniors will see nothing;
    • Parents looking to re-enter the workforce will see nothing; and
    • People who have been laid off and have less than $10,000 of non-EI income will see nothing.

    Seems like a lot of complex legislation for nothing.


    Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr is the President & Founder of CGL Strategic Business & Tax Advisors; you can find out more about Cory’s biography at http://www.CGLtax.ca/Litzenberger-Cory.html


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    Opinion

    3 wards for the city based on federal and provincial governance models.

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  • An interesting proposal has been suggested for our municipal governance that is modeled after the provincial and federal electoral system.
    Federally we have Members of Parliament (MPs) and one of them is also the Prime Minister. Provincially we have Members of the Legislature (MLAs) and one of them is also the Premier.
    Federally our fine city is divided into 2 electoral districts or ridings both federally and provincially, so we have 2 MLAs and 2 MPs, and anyone could also be our Premier or Prime Minister, or Speaker, Cabinet Member, or Opposition Leader.
    Back to our city’s governance, we elect 9 people currently, 8 councillors and 1 mayor for 1 electoral district. The idea being suggested is 3 wards, 3 councillors each with 1 also being the mayor.
    Population wise and geographically 3 wards would be fairly easy. Using the last municipal census. Approximately 1/3 the population lives east of 30th Avenue so that would make an easy boundary and approximately 1/3 live north of the river, another easy boundary. The other 1/3 would be south of the river and west of 30th Avenue. Easy and already done.
    Now, why would we consider 3 wards over governance of a single entity?
    Look at thhe history of the wards, the services offered, crime rates, return on investments and you can see the reason.
    The east of 30th Avenue ward has, 3 high schools with plans for 2 more, has the Collicutt centre with a recommended site for the next multi-use aquatic centre, 2 emergency services location, and a pickle ball court centre.
    The north of the river ward has no high schools with no plans for any, the Dawe recreation centre, YMCA, and 1 emergency services centre.
    The other ward has 1 high school, 1 college, downtown recreation centre, museum, tennis courts, Michener pool, Westerner, Kinex arenas, curling rinks, a proposed cultural centre, hospital, multiple emergency services to name but a few.
    So it is easy to see the rationale behind and the appeal for a ward system as our city grows in a manner favourable to some and not to others. 3 wards with 3 councillors each and 1 of the 9 would also act as mayor. It works provincially and federally and it would make councillors responsible and accountable for any continued disparities, right?
    It is an option. Just saying.


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    Opinion

    Will Red Deer finally get a seat at the adult table? Do we want a seat at the adult table?

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  • Opinion by Garfield Marks

    “Red Deer needs a Cabinet Minister“, says the Chamber of Commerce. Yes the fact is we need a seat at the table, but do we have a politician worthy enough to sit at the adult table?

    Yes, I believe we do, at least 2. For far too long, Red Deer has been electing invisible politicians, seat warmers, trained seals, caricatures of what we think we want as politicians. People representing in some shallow way what the population wanted, perhaps we want invisible politicians. But that is not what we need.

    The subject came up due to the recent Provincial election but it is the same in all 3 levels of government. Federally, too like Provincially there is a cabinet table that makes the decisions and sets directions and implementation but there is a somewhat cabinet like table municipally, involving a few people including city manager, mayor, downtown reps, developers and others, that kind of set the game plan, at least in my opinion.

    This came up over coffee one day, started when someone asked who decided to spend almost a million dollars of our taxes on a piece of art off 32 Street saying “Welcome to Red Deer”?

    The hypothesis is that there is an inner circle or small group, not city council, that decides what, where and when to do anything in this city. Which subdivisions to build as we seem to be opening up new subdivisions every year while we have trouble filling the ones already on the market, means there must be at least one developer at this table.

    The question remains then about whether the citizens of Red Deer want a seat at the adult table? Do we accept just paying the bills as our only role?
    We spend millions and millions of dollars every year on politicians, for what? Photo ops, ribbon cuttings, welcome speeches and to vote as they are told by the members at the adult tables.

    Will we get a Cabinet Member from Red Deer? I think we might but just 1 at the Provincial Cabinet level, because the table is small and Red Deer is not seen as a major player needing to be heard. As for federal and municipal tables that is not even on the horizon. Just saying.

    The views in the above story are the opinion of the writer’s. 


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