Special to the Financial Independence Hub
With August winding down and Labour Day around the corner, students across the country will be making their way to colleges and universities. As they say goodbye to their curfews and hello to independence, they’re forced to take on new responsibilities like doing their own laundry and managing their finances.
While this won’t be new for all millennials – a recent survey by H&R Block Canada found that 63% of respondents 18-24 were already filing taxes without help from their parents – everyone can benefit from a study session on personal finance and tax tips.
Take advantage of budgeting apps
Don’t put down your phones! Millennials should take advantage of mobile apps when it comes to managing their money. Apps like Mint and YNAB (You Need a Budget) can be valuable assets when budgeting. Most banks offer free apps to help their customers manage their finances.
Maximize your tax return
It’s never too early to start thinking about taxes. In 2016, the average refund for a student at H&R Block Canada was more than $1,100. That’s 21 music festival day passes, 346 thrift shop t-shirts, or 49 bottles of Canadian craft gin … depending how you look at it. There are simple things students and recent graduates can do in order to maximize their tax returns:
- Claiming tuition: Every student receives a T2202A form that outlines all information needed in order to claim the Tuition amount. The Textbook and Education credits are no longer available federally, although they are still available in some provinces.
- Keeping receipts: “Adulting” is hard, but staying organized and keeping receipts in a safe place will only make tax season easier. Students should hang onto receipts for moving expenses, medical expenses, receipts related to a side hustle and charitable donations (including Alumni donations).
- Student Loans: An important part of many millennials’ budgets, the federal government recently took steps to prevent student loans from becoming an overwhelming burden. As of November 2016, Canadians no longer need to repay student loans until they are earning at least $25,000 per year. If you are starting to repay your loans, you may be eligible to claim an amount for the interest paid next tax season.
The difference between RRSPs and TFSAs
Those who are entering the workforce might be tempted to spend their entire paycheques. While a trip to Australia would certainly be unforgettable, saving for retirement shouldn’t be forgotten. Registered Retirement Savings Plans (RRSPs) and Tax Free Savings Accounts (TFSAs) are valuable tools for saving for retirement or even for a down payment on a house.
The main difference between the two is RRSPs are tax deductible whereas TFSAs are not. Funds can be withdrawn from a TFSA without having to pay tax, whereas RRSP withdrawals are considered taxable income. The Home buyers’ plan allows Canadians to borrow up to $25,000 tax free from their RRSP in one year, with two years before they need to start paying it back.
The deadline to file this year’s income tax returns in Canada is April 30, 2018, right in the midst of exam season. Be sure to stay organized year-round and prepare early, to avoid a cram session come April.
Lisa Gittens joined H&R Block as a tax professional in February 1993, then left to pursue a degree in Business Administration & Marketing. She has worked in areas of Hospitality, Education, Healthcare, and Not-For-Profit. Now in Toronto, she has stepped back into her role as tax professional and been steadily promoted within her district. She is actively engaged as an office leader, tax instructor and H&R Block`s national spokesperson.