As students, you’re already juggling a lot at once, from college film classes to your part-time job as a barista, not to mention trying to have a social life. Taxes are likely the last thing on your mind. However, taking the time to manage your finances can help lower stress and make your tax filing process as easy as possible. We understand that, as a student, you’re likely on a tight budget, but the good news is that there are plenty of ways to save money and take control of your financial situation all at once. Whether it’s through claiming tuition credits for your schooling, deductions for your side hustle or putting away cash for your future with an RRSP, these financial moves can have big payoffs in the long run.
Let’s dive into how to be the most prepared to conquer your tax filing and discover how tax planning can be smart and financially beneficial.
- Developing good habits in managing your finances and maintaining accurate records can help prevent tax filing errors and save you more of your hard-earned money.
- Students can benefit from tax credits and eligible expense claims, as they provide opportunities to reduce their taxable income and offset education-related expenses.
- Determine which savings account or combination of accounts is best for your unique financial situation. With the right plan in place, you can begin building wealth and achieving your financial goals. Seeking guidance from TurboTax experts can help you figure out what these savings plans mean for your taxes.
Key Benefits of Tax Planning for Students
As a student, finding ways to save money can be a challenge (in this economy), but there are tax credits available that can help you out. By reducing the financial burden you feel around tax time and thanks to your education-related expenses, you can feel more in control of your finances and worry less about your financial future.
The tuition tax credit is just one of the many tax credits available to students. By claiming a percentage of your tuition fees, students can offset their tax bill. Furthermore, other refundable credits like GST and HST can also be claimed, which means low-income earners and students with side hustles may even receive funds from the government.
Make sure to file your taxes, even if you’re not earning big bucks, because you never know what savings opportunities and rebates might be waiting for you. To make the most of these credits, ensure that you’ve got your T2202 form from your school, and remember that these credits can carry over to the following years if you don’t need them all at once.
Handling Scholarships and Bursaries
Scholarships and bursaries provide financial assistance to cover tuition and other expenses, potentially reducing the need for student loans and minimizing costs, which can reduce your stress and help you focus more on your studies. However, be aware that the CRA may consider these taxable income. It’s important to accurately report these payments on your tax return. Seeking guidance from a qualified TurboTax tax expert during tax time can help ensure compliance, avoid issues with the CRA, and maximize tax benefits.
Plan for your future with helpful savings accounts
There are many investment options available for students looking to plan for their financial futures; the primary three include an RRSP, a TFSA, and an FHSA account.
Let’s explore deeper into each option:
RRSP account
Your first account option is a Registered Retirement Saving Plan (RRSP) which is your own investment account where you can save money for when you’re old and grey. The earlier you start contributing to your RRSP, the more your contributions will grow with compound interest. But why is an RRSP such a big deal? Well, retirement probably feels like it’s a long way away, and of course you want to stay young forever, but setting aside money now will give you more freedom when that time comes.
It’s important to remember that while contributing to your RRSP can help reduce your current tax bill, withdrawing from the account early can have its own set of tax implications. When you contribute and claim a deduction, the amount contributed is subject to tax deferral, meaning that you’ll pay taxes on it in the future when you withdraw it from the account. However, if you do decide to withdraw from your RRSP early, you’ll need to report it as income and may owe additional taxes if it bumps you up into a higher tax bracket.
TFSA account
The second option is a Tax-Free Savings Account (TFSA), which is a savings tool that provides tax-free growth, offers flexible contribution room, and allows unlimited withdrawals without penalty. A unique feature of TFSAs is that they are not just for retirement; you can use them for last-minute road trips, buying furniture for your new apartment, and even getting materials for that new hobby you picked up (again!).
FHSA account
The third option is the First Home Savings Account (FHSA), which is intended to help Canadians save for their first home. We know that this might not be in your prospects now, or even in the near future, but the FHSA offers lifetime contributions of up to $40,000 with an annual contribution limit of $8,000. How is this relevant to you? Well, contributions to an FHSA are tax-deductible, and any withdrawals you make to purchase a first home will not be taxed, and you won’t need to repay them.
Understanding the advantages of filing your taxes on time
By filing your taxes accurately and on time, you could be eligible for benefits like the GST/HST credit, which can provide you with some extra cash.
Filing your taxes also gives you the opportunity to build good financial habits. By keeping track of your income and expenses, as well as filing your taxes consistently, you’re developing key skills for financial management that can last a lifetime. Trust us, your future self will thank you for building these good habits early on.
If the stress of financial planning or filing taxes in general is causing you some anxiety, know that it’s a common feeling and you’re not alone. There are tools out there to help you stay organized and save money, so you can avoid the headache of scrambling during tax season. You’ll likely be expecting a refund, but just in case you owe and are unable to pay in full, there are payment options available through the CRA. Seeking advice from a TurboTax tax expert can provide peace of mind.
Get the help you deserve
Taking control of your finances may feel daunting at times, but the good news is that you have the power to master your financial future. By seeking help and guidance from our team of TurboTax tax experts during tax time, you can feel confident in your ability to navigate complex financial situations. From maximizing your tax benefits to ensuring proper handling of your responsibilities, our tax experts are here to help!
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