University and College is tough – what, with all the readings and studying, and don’t get us started on exam time; but there is also that sky-high tuition we have to pay. You might be lucky to have your parents paying your way, but some of us have to take this upon ourselves. So how about using that one time a year to get the most out of your tax income and get a nice refund to help you out!
Guys and gals, please remember, we don’t claim to be experts in this post is on advice we wish to l you what we wish someone told us, so we’re sharing our experience and some tips we learned along the way, with hopes of helping you. Even though advice is for Canadians, we still suggest you read on – you’ll learn things you can apply to any Tax system.
TIP – do you pay for rent while attending school? Did you purchase your work attire as part of the requirement for your job? Do you have a child in daycare while attending school? These things and many more you can claim as part of your Income Tax and get a nice Tax refund back!
Before we launch into great advice and tips, let’s understand what RRSP is. A Registered Retirement Savings Plan helps Canadians save for their Retirement. Each year you get a certain amount that’s allocated to your contribution room, which tells you how much money you can put into your RRSP. Good news is if you don’t contribute anything, the amount is carried over and you can use it in the future.
You may hear about taxes every year from your parents. There are posters and advertising all over the city about it. Take those as signs that it’s time to learn more and discover how to how benefit from doing taxes properly.
We personally get really excited for Tax Season! Here is why you should too:
- If you play it smart, you can get a good amount of cash back from the Government (we’re talking about thousands of dollars)
- Invest into your future by opening up an RRSP account
- Reflect on your past year and save up for your contribution this year
- Who doesn’t like extra cash?
TIP – We’re sure you’ve done the math and some of you buy a monthly TTC pass. If you do, then have you heard about the MDP Program? Metropass Discount Plan is a great way to save time and money. If you plan to buy a monthly pass for the next 12 months, then sign up NOW! Not only is your pass delivered to your home (no more remembering to buy one and lining up for it), but it’s also cheaper! Tax perk – you get a letter at beginning of every year, telling you how much in total you paid so that’s your number to deduct in your tax return! Awesome? I think so!
We both didn’t have an RRSP account in high school or university. But once our careers kicked off, it was time to visit a bank and get the ball rolling. Now that we reflect back on our lives, it would be great if someone offered some of these tips to us. Our goal at first was just to break even in the tax refund so we wouldn’t have to pay anything back to the Government. If you currently work and don’t have an RRSP account, during tax season, you might be getter back around .
TIP – do you take the Go Train? If yes, get yourself a Presto card NOW! You can then download a Transit Usage Report in your account and see what you can claim for your tax return!
Common misconception is you don’t file for a tax return if you don’t work. But, if you’re a student at a College or University, you can get a nice return! You can claim such things as:
- Tuition and textbooks
- Interest paid on your student loan
- You moved out to attend school
- Public transit
But don’t worry – if you are anything like us, then you’re clueless and don’t know any of this but the good news is you can claim some of this years later. After I graduated from Ryerson, I claimed all my tuition years later and got a huge sum of $4,000 in one go. YEAH!
TIP – you can claim the interest paid on your Student Loan for the preceding five years. If you missed the train for the past few years, don’t worry, you can still claim this! However, don’t wait too long.
We never filed for income tax by ourselves before. Luyi and I would always join our parents and we would go to their accountant. A few years ago, Luyi started to file for taxes by herself, using a FREE tax software. It was a bit tough at first, but now it’s a breeze. And this year, I’ve decided to do it myself as well. Why? It’s FREE! It’s easy to learn! And I can add another check mark of my goals achieved in 2017!
Because you’re in school, your income tax is super easy to figure out, and we suggest you learn about it now and try it out for yourself. This will help you in the long run, trust us. Not only will you understand taxes and your refund better, but in the future, you’ll be more knowledgeable in what you can claim and what you cannot.
TIP – Did you know you can file a tax refund if you moved to a new home? But this is tricky, so be careful! You have to be a full-time student and you also had to have received a scholarship, bursary, certain prices or research grant in the same year. Plus, your new home has to be at least 40 km from your university/college.
Step #1 – set-up your account on Canada Revenue Agency. From there, you can have your tax refund go straight into your bank account as direct deposit, instead of waiting for a cheque. You can see your past tax refunds and if you participate in RRSP then you can see your limit for the year as well.
Step #2 – get yourself a FREE tax software! Yep! FREE! I didn’t know you can get this, I mean, if we pay an Accountant, surely you would pay something to submit your own taxes – but nope! We use Studio Tax. Take time and familiarize yourself with it – learn it and ask your friends, coworkers and family any questions. Hopefully you kept all your past years’ tax refunds, so you can look at how the paperwork was filled out.
Step #3 – make sure you know the deadline by when you need to file for your tax refund – April 30th. We always start to think about filing for tax refund in beginning of the year. If you make contributions to RRSP, then make it your goal for the first 2 months. Last thing you want is to freak out you don’t have enough money for your RRSP contribution.
Step #4 – get your paperwork in order and know all your numbers. Make sure you have print-outs of your tuition, receipts of textbooks purchased, any interest paid on tuition and any qualifying public transit receipts.
Step #5 – figure out if you want to contribute to RRSP. If you don’t have an RRSP account, go to your bank right now. The deadline for RRSP contribution for past year is March 1st this year. That means you have 2 months at beginning of every year to save up for that contribution.
TIP – you may receive a letter from Canada Revenue Agency asking to see receipts or proof of a certain claim. Don’t be stressed! It’s very normal! We’ve had a few of those letters ourselves, and we either scanned and submitted everything electronically through our Canada Revenue Agency accounts online or mailed them in. So keep your receipts and paperwork! You know those monthly TTC passes? Save them! They’re your proof if you are not part of the MDP.
Deep sigh, we know, we get it, RRSP might be a subject that you would rather not talk about. After all, it’s all about Retirement, and that’s really far away. Right? Wrong! It’s way more fun than just Retirement. Trust me, you want to read this.
RRSP can help you with buying your first home! Did you know, that you can withdraw up to $25,000 from your RRSP to use as part of your down payment, without any penalty? You have to pay it back of course, and within a limited amount of time. But think about it, all those years you’ve put a little bit into your RRSP can be used to help you much earlier than your retirement. Best part? You don’t pay interest on this $25,000, whereas the bank will always charge you interest on the mortgage amount you borrow.
RRSP can also help you get a bigger tax refund! Now you’re shaking your head and thinking why didn’t you know any of this. Isn’t it awesome? The most you contribute to your RRSP account, the bigger your tax refund. There are a few things to consider, and different people will give you different advice. We are giving you advice that worked for us.
TIP – if you have never contributed anything to your RRSP, and are now getting ready to buy a house – check out what your RRSP contribution room is, and if it’s $25,000, then max it out! If you contribute $25,000 in one year to your RRSP, not only can you then withdraw this money to use as part of your down payment with 0% interest. But you will also land a nice tax refund from the Government, which you can also use for things like new furniture, renovations or add it to your down payment.
Here is one very important thing you need to consider though – tax brackets. In school, you’re not making a full-time good salary, so contributing a lot to RRSP doesn’t really make sense. Unless, maybe you need the extra money now. Later, when you graduate, and you’ll land that amazing job and make the good bucks, because of your high income, your tax bracket will increase – and sadly, the Government will tax you more. The more you make, the more taxes you pay. At that time, a contribution to RRSP can really save you.
From personal experience, I only started contributing to RRSP a few years ago and my Accountant would always chastise me on my $5,000 contribution. But you know what? I’m trying to save that $25,000 for my down payment and I need the big tax refund now – so it makes the most sense for me at the time. Luyi, on the other hand, has almost reached her $25,000 RRSP, so she’s going to slow down and not contribute much each year. In fact, she will contribute just enough to break even so she doesn’t have to pay the Government.
TIP – if you read about RRSP, and you talk to your friends, colleagues, family, banker and accountant; you will see there are a lot of advice and opinions out there. Take it all in, but do yourself a favor and think about what you want in your near future and come up with a plan that works best for you.
Below is a quick checklist you can copy down and tick those boxes off as you prepare for your own Tax Income:
- Create your own Canada Revenue account
- If you plan to open an RRSP account, go visit your bank now
- Mark your calendar with RRSP Deadline (March 1st) and plan on saving that amount
- Mark your calendar with Tax Income deadline (April 30th)
- If you’re doing taxes yourself, download that free tax software and check it out
- If you want an Accountant to do your taxes, find one and book an appointment
- T4 (this will be mailed to you by your employer if you work or ask them for it)
- Tuition statements
- Textbook receipts
- Public Transit documents
- Rent bills
- Any other possible documents which you can use to claim tax on
So think about it, write down a few numbers, download that free tax software and play with numbers! Plug in contributing $0 RRSP and then change it up to a few hundred to a few thousand dollars. And do what makes the most sense for you! Remember, you are the captain of your life.
That’s it for now! We hope this has helped some of you or at least gave you tips on how to get a bigger Tax Refund. Feel free to comment down below as we would love to hear from you.
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Make sure to check out 7 Ways to Prepare for a Successful Job While in School and get that smart jump on your future career!