There are people out there who love income tax season. They like crunching the numbers and determining if they get a tax refund.
For medical residents, surely it’s one of the last things on your mind right now.
But income tax returns must be done, and the deadline is April 30, 2019. So gather your tax slips and documents as you receive them and be ready to go.
1. Use certified tax software
The Canada Revenue Agency publishes a list of certified tax software you can use to file your income tax return through Netfile. There are both free and paid products that you can choose from. (We suspect no one reading this would consider filing paper tax returns.)
2. Get your taxes done at a discounted rate—or even for free
If you don’t have time to complete your income tax return, speak to your MD Advisor. MD has a referral network with accounting firms and qualified tax specialists throughout the country who can complete tax returns for medical residents at a discounted rate or free of charge.
3. Claim tuition tax credits
Any tuition fees you paid during residency may be eligible for the non-refundable tuition tax credit. Apart from tuition, fees paid for examinations, diplomas and certain exam preparation courses, as well as mandatory computer service fees, may also qualify.
The federal government eliminated the education and textbook tax credits effective January 1, 2017. However, unused amounts from years before 2017 will remain available to be claimed in 2017 and subsequent years. The education and textbook tax credits have been replaced with increased Canada Student Grant amounts in an effort to make post-secondary education more affordable for students from low- and middle-income families.
4. Exclude scholarships and bursaries from your income
Amounts you received in a year for scholarships, fellowships and bursaries can be excluded from your income if you were enrolled at a designated educational institution in a program for which you can claim the full-time education tax credit. Post-doctoral fellowships generally have not qualified since legislative changes in 2010.
5. Remember the interest on student loans
If you’ve received loans under the Canada Student Financial Assistance Act or a similar provincial or territorial program, you may be eligible for a non-refundable tax credit on the interest portion of your payments. Interest paid for any other debts, such as bank loans or lines of credit, is not eligible for this credit. Provincial non-refundable tax credits may also apply.
6. Claim union, professional and membership dues
Amounts paid for membership (required to maintain a professional status recognized by statute) in medical associations or the college of physicians and surgeons of a respective province or territory are generally deductible for tax purposes. Union dues, such as those paid to a provincial residency association (e.g., PARO, Resident Doctors of Saskatchewan, Maritime Resident Doctors, etc.) are also generally deductible.
7. Don’t forget moving expenses
If you relocated at least 40 kilometres to be closer to a new work location, you may be able to deduct allowable moving expenses against employment income earned at the new location or, if you’re a student, against taxable scholarship or grant income.
8. Claim medical and dental expenses
For the 2018 tax year, you can claim a 15% federal non-refundable tax credit on qualifying medical expenses that are more than either $2,302 or 3% of your net income (whichever is less). The first year of residency is a good time to claim medical and dental expenses that aren’t covered by your employer’s health insurance. After all, your income will likely be the lowest of your future career. Note, however, you must use all available tuition tax credits before any medical expenses to reduce your taxable income.
9. Did you buy a home?
If you were in a position to buy your first home, you might be able to claim a federal non-refundable First-Time Home Buyers’ Tax Credit equal to 15% of up to $5,000 in the year of acquisition. This can result in a tax savings of up to $750.
10. Claim your child care expenses
If you’ve already started your family, remember that the cost of daycare, babysitters and full-time caregivers is deductible, to a maximum of $8,000 a year for children under 7 and $5,000 a year for kids aged 7 to 16. Generally speaking, this deduction must be claimed from the income of the spouse or common-law partner with the lowest net income (unless that individual is at school, disabled or separated from you).
Contact your MD Advisor to learn more and to obtain a referral for a tax specialist in your community.