Top 5 Tax Tips for Young ProfessionalsBrian Jang ON May 24, 2016
For many of you young professionals, handling your own finances might be an entirely new—and sometimes daunting—process. But now that school is out and you are entering the professional world, it is important to know what to do with your income. Remember, the older you get, the more complicated your tax situation might be. So, staying informed from the start will definitely help you down the road. Without further ado, here are a few quick-and-dirty tips to help young professionals understand the tax scene.
Claim interest paid on student loans
Not a fan of student loans? You are not alone. But the interest from federal or provincial student loans could decrease your taxes. You will get a 15% tax credit on the interest paid during the tax year, in addition to any of the five previous tax years (as long as it hasn’t already been claimed).
Contribute to an RRSP
Once you start receiving a steady cash flow, you should start planning for the future by saving for retirement now. You will want to put a portion of your earnings into a registered retirement savings plan. Why invest in an RRSP instead of putting your money into a savings account? Because the amount of money you contribute to an RRSP is tax deductible. And remember, the earlier you invest, the higher the return.
Reduce your taxes with medical expenses
If you don’t have a health plan through your company, you can claim your medical expenses. The tax credit of 15% is on the amount exceeding 3% of your net income or $2208, whichever is less. Keep in mind, however, there are many items that don’t qualify as medical expenses, including non-prescription medications, gym memberships, and cosmetic procedures.
Claim moving expenses
Did you know that if you have to relocate for a new job or education, your moving expenses might be tax deductible? If your new residence is at least 40 km closer to your school or place of business than your previous home, you can claim some of your moving expenses. Some of the allowable moving expenses include transportation and storage fees for your items, cost of breaking your lease, replacing your driver’s license, and temporary living expenses.
Take advantage of the Home Buyers’ Plan
If you are thinking about buying a home, it might be a good idea to look into the Home Buyers’ Plan. This program allows you to withdraw up to $25,000, tax free from your RRSP. What’s more, you will get a tax credit of $5000 when purchasing your first home.
Don’t get left behind. Getting a head start will allow you to take full advantage of any tax deductions you are entitled to, as well as protect your current and future earnings.
If you are a young professional interested in learning more about taxes, contact BCJ Group, Chartered Professional Accountants for a free consultation today!
- Registering for the GST Retroactively
- Which Canadian Business Structure is Right for You?
- The Gig Economy in 2020: Tips for Saving Taxes
- How the Government is Helping Seniors During the COVID-19 Pandemic
- The True Costs of Everyday Expenses