As a medical resident, being aware of the tax benefits that you may qualify for can help minimize the taxes you pay. If you receive a tax refund, consider making it work for you by making additional payments on your student loans or line of credit, paying off your credit cards or investing in your RRSP or TFSA.
Here are five tax-saving tips for medical residents.
File your income tax return
There are many good reasons to file your income tax return every year, even if you don’t owe any income tax. One is that you may qualify for the GST/HST credit, a tax-free quarterly payment that you could receive, depending on your income level.
A second benefit is that you can start accumulating RRSP contribution room, which is calculated as a percentage of your earned income during the year. Even if you don’t have the money now to contribute to an RRSP, this contribution room is carried forward for use in future tax years.
Claim education-related tax credits
During your residency, you may be eligible to claim the tuition tax credit. Fees paid for admission, application, use of library or laboratory facilities, examinations, diplomas, and mandatory computer service fees may also qualify for the tuition tax credit.
Claim interest costs on student loans
If you have an existing loan with either the Canada Student Loans Program and/or a provincial/territorial loans program, you can claim a tax credit on the interest portion of the loans. The federal non-refundable tax credit amounts to 15% and provincial non- refundable tax credits may also apply. You cannot claim a tax credit related to interest paid on a personal loan or line of credit.
Claim your moving expenses
If you move at least 40 kilometres closer to a work location or to attend full-time post-secondary education, you will be able to deduct moving expenses against employment income or for students, against taxable scholarship or grant income. Moving expenses can include such things as transportation and storage costs, travel expenses, temporary living expenses, the cost of cancelling a lease, and various other moving-related costs.
Make use of a tax-free savings account (TFSA)
If you can save money, be sure to take advantage of the TFSA. This flexible account allows you to contribute up to $6,000 a year in 2020. While the contributions are not tax-deductible, any earnings in the account can grow tax-free and all withdrawals are tax-free.