Starting a new job can be very exciting, but there are a number of personal financial implications and tax consequences. Getting everything in order as you embark on your new job can help you save money on taxes and improve your overall cash flow.
If you are considering moving to a new home, waiting to move until you start your new job might allow you take advantage of a deduction on your moving expenses. The new house must be 40 kilometers closer to the new job location for the moving expenses to qualify as a deduction. The type of expenses that you could claim include shipping fees, costs to move your household goods, storage fees, lease cancellation costs, meals, lodging expenses, selling costs on your old house and costs to revise legal documents for address updates such as your driver’s license and utilities. If your prior residence remains unoccupied after you have moved, you can also claim mortgage interest, property taxes, insurance premiums and utilities up to a maximum of $5,000.
Starting a new job with a new employer means that your entire Canadian Pension Plan and Employment Insurance contributions reset for the fiscal year. They do not disappear. If you were approaching the maximum withholdings for the year, this resets with the new employer. You may be counting on receiving a little more with each paycheque once these are maxed out, and switching jobs delays this cash-flow bump. When you file your year-end tax return, you can get the excess contributions refunded.
Being Hired As a Consultant
If you are hired on as a consultant or freelancer with your new job, you may be able to deduct additional home office and business expenses. These might include transportation, supplies, and home office expenses. Be sure to understand the working arrangements and how you should be invoicing and getting paid. If you are considered to be an independent contractor, your employer does not withhold income taxes. You are responsible for remitting to these amounts to CRA. Additionally, CPP contributions, which are normally split between an employee and employer, become entirely your responsibility.
Savings Plans and Benefits
When you are starting a new job, make sure you understand all the benefit plans that your new employer offers, such as your medical benefits, allowances and savings plans. Understanding the benefits and making sure you have signed up as soon as possible can help you make sure that you are not missing out on benefits and savings provided by your new employer. If your prior employer had any sort of retirement savings plan, stock purchase plan or other employee benefits plan, make sure you understand what is required when you leave the company. It is imperative that you understand your rights and obligations under the plan, as each plan usually has its own complexities and requirements.