2014-0563291E5 Working Income Tax Benefit

Principal Issues: Can an individual choose not to claim the education tax credit (ETC) in order to be eligible for the working income tax benefit (WITB)?

Position: An individual can choose not to claim the ETC but this does not determine whether or not an individual is eligible for the WITB. The individual must be an "eligible individual" to be eligible for the WITB.

Reasons: An "ineligible individual" as defined in subsection 122.7 (1) of the Income Tax Act for the purpose of the WITB includes an individual that was enrolled as a full-time student at a designated educational institution for a total or more than 13 weeks in the taxation year, unless the individual had an "eligible dependant".

Author: Shea-Farrow, Nancy
Section: 122.7, 118.6

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                                                                                                                                                          2014-056329
                                                                                                                                                          N. Shea-Farrow

May 4, 2015

Dear XXXXXXXXXX:

Re: Working Income Tax Benefit

We are replying to your letter regarding whether an individual can choose not to claim the education tax credit in order to be eligible for the working income tax benefit (the “WITB”).  You also would like to know the provisions of the Income Tax Act (the “Act”) that apply.

Our comments:

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

The education tax credit is a non-refundable tax credit legislated in section 118.6 of the Act.  The purpose of the education tax credit is to recognize non-tuition related costs of post-secondary education. The credit is permissive, which means that if an individual qualifies for the credit, he or she can choose whether to claim it to lower income tax otherwise payable.  However, any amount that may be carried forward for use in a future year is determined by a formula and does not depend on what the student chooses to claim. Therefore, if a student chooses not to claim all or such portion of the available tuition, education and textbook tax credits required to reduce federal taxes payable to zero before claiming certain other tax credits, the tuition, education and textbook tax credits not claimed cannot be carried forward and will be lost.

The WITB is a refundable tax credit, provided in section 122.7 of the Act, which is intended to provide tax relief for eligible working low-income individuals and families who are already in the workforce and to encourage other Canadians to enter the workforce.  Further information about the WITB is available on the Canada Revenue Agency’s (CRA) website at http://www.cra-arc.gc.ca/bnfts/wtb. 

If an individual is an “eligible individual,” as defined in subsection 122.7(1) of the Act, the individual may make a claim for the WITB by filing an Income Tax and Benefit Return. An “ineligible individual,” also defined in subsection 122.7(1) of the Act, cannot claim the WITB.  An ineligible individual includes an individual who was enrolled as a full-time student at a designated educational institution for a total of more than 13 weeks in the taxation year, unless the individual had an eligible dependant.  Therefore, regardless of whether the individual claims the education tax credit, a full-time student who meets the definition of an ineligible individual in subsection 122.7(1) of the Act cannot claim the WITB.

Schedule 6, Working Income Tax Benefit, available on the CRA’s website, shows that the calculation for the WITB is determined with reference to “adjusted net income” and “working income.”  Neither of these amounts is affected by whether an individual actually claims the education tax credit.  

We trust our comments will be of assistance.

Yours truly,

Pamela Burnley, CPA, CA
Manager - Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate

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