Tax tips for 20-somethings

No one likes tax season but here’s some advice to get you through all the paperwork without pulling out all your hair…unless you can rock the bald look.

Please be advised that this article should only serve as a jumping off point for your taxes education and you should speak with an accountant for professional tax advice.

Organize your files

Before you attempt to fill out your income tax forms, you should have all of your information with you says Brad McNeil, an accountant and partner with Famme and Co. Professional Corporation in Stratford Ontario. Make sure you have a tax slip from every employer over the past year as well as any other tax slips received in the mail or documents marked for tax purposes.

McNeil advises to also gather any RRSP, medical, donation, rent, public transit and tuition receipts you have.

Make your tuition work for you

Both tuition and rent receipts may get you some money back.  Students can claim credits for both tuition and books and rent (rent receipts are required if you live off-campus).

Know your numbers

The education amount allowed is $400 per month for each month you are in school on a full time basis. The textbook amount provides an additional $65 per month. For part-time students the amounts are decreased to $120 and $20 per month respectively.

Take note that what you pay in rent can qualify for a tax credit if your income is under a certain amount for the year. You also may be able to claim moving expenses if you were a student at the time of the move (whether it was moving to school or moving home for the summer).

Plan ahead

A good tax refund is not always your goal says McNeil. If you receive a large refund, this may indicate that you paid too much tax during the year and simply prepaid your taxes.

If you are a student with a relatively low income, try requesting that your employer not withhold income taxes from your wages.  Your take-home pay will be higher and your tax refund will be smaller, and this way you are getting the money when you need it with each pay. “Having a dollar today is always better than having a dollar tomorrow,” says McNeil.

An ode to student loans

If your student load is registered with the government the interest you pay on it may be eligible for a tax credit but the principal payment on the loan is not deductible.

Get a helping hand

Because tax laws are complex and can change frequently, McNeil advises getting some help with your taxes to take advantage of all the benefits you are entitled to. Preparation is generally not too expensive and don’t be afraid to get a second opinion.

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