Everyone lives life a little differently, and at a different pace. Getting your first job, getting married, buying a home, or starting a side hustle are all major life events. While we all have unique circumstances, what’s for certain is that life events and taxes go hand in hand. A good rule of thumb is that for every milestone you hit, you can expect that it’ll somehow affect your tax filing and might add to the complexity of your taxes.
In partnership with H&R Block, we breakdown a few of the ways your taxes can change in accordance with big life events and highlight a number of credits and tax deductions you can take advantage of along the way.
Becoming A Post-Secondary Student
Perhaps the first set of tax credits Canadians start qualifying for are related to post-secondary education. If you have a part-time job to help pay for tuition, you’ll need to claim that income on your tax return. What’s helpful, though, is you can likewise claim tuition fees as a tax credit, meaning they’re fully exempt from taxation.
Not everyone will hit university right after high school, though. The Canada Training Credit (CTC) is a newer, non-refundable tax credit available to post-secondary students between the ages of 25 and 65 to further help offset the cost of education. Whether you’re entering university for the first time, or picking up a few more skills for your current employer, you can accumulate $250 of your CTC limit each year, up to a maximum of $5,000 in a lifetime.
Getting Your First Job
If you’re entering the workforce for the first time, you’ll soon be acquainted with a T4. A T4 slip will be provided to you by your employer, and it will lay out all your employment earnings and deductions for the year, which you’ll then report on your personal tax return.
Don’t forget that you may also be entitled to claim credits related to your employment. For instance, if you belong to a union, odds are you’ve had to pay annual union dues, and those fees can be claimed as a tax deduction on your tax return.
Moving To Another Province Or Territory For Education Or Work
Canadians may find themselves moving around the country for a number of reasons, and relocation can impact your taxes. If you move cross-country for work, you can claim those moving expenses — think moving company costs; or if you’re more D.I.Y., you can claim the trailer rental or the kilometres you’ve clocked with your vehicle. Students can likewise deduct moving expenses, but only if they begin earning income in their newly adopted city.
Working remotely is a different situation. Say you’ve moved from Ontario to Alberta, but your employer is still based out of Toronto, you won’t be eligible for those relocation deductions. If you’ve uprooted completely for a fresh start with a new company, you’re welcome to those deductions.
Some Canadians love the idea of being their own boss, and this self-driven ambition often leads them to start their own companies. When you’re self-employed, you open yourself up to new possibilities, including how you file your taxes.
In addition to reporting your annual income, you can begin to claim various business and professional expenses you rack up along the way as well. Applicable expenses could include something like office supplies; and if you work from home, you could write off a portion of your rent, basic utilities, and internet. So long as they’re explicitly business-related, you’re entitled to those credits.
Filing With A Spouse
Marriage is a major milestone for many, and while it’s more exciting to plan the honeymoon, knowing how to prep your taxes as a couple can be just as important.
Even though you’re married, each Canadian resident is required to file their own return. But after updating your marital status with the CRA, you can transfer certain credits to your spouse, and vice versa. If, for instance, your spouse isn’t working and won’t claim any income on their return, you can claim a spousal credit worth up to $13,229 on your personal 2020 return.
You can also see some significant tax savings by combining things like charitable donation credits onto one spouse’s return. A quick rule of thumb is to claim donations through the spouse with the higher income, to potentially bring them into a lower tax bracket.
Buying Your First Home
Buying a home might be one of the most exciting, nerve-wracking, and significant investment in a person’s lifetime. And there’s an extra incentive to investing in real estate, too: you can claim Canada’s Home Buyer’s Amount on your personal tax return to help offset some of the costs.
You can claim up to $5,000 of your down payment on a qualifying home (be it house, townhome, or apartment), as long as neither you nor your partner has owned another home in the preceding four years. You can also split that amount between both partner’s returns, so long as the maximum credit claimed is no higher than $5,000.
From newborns to adoption, bringing a child into your life is a landmark moment. Families can prepare for the future by updating their CRA statuses to reflect their growing home, and once you add your child to your return, you are eligible to receive the Canada Child Benefit, a tax-free monthly payment to help with the cost of raising a child.
Each parent will file a return to receive monthly payments, and these are based upon the family’s net income. Well before first steps and first words, benefits payments can begin as soon as 30 days after a child’s birth.
Becoming A Senior
Canadian seniors may not exit the workforce the second they hit their 60s, but they do become eligible for various retirement age benefits. The Canadian Pension Plan (CPP) is a monthly, taxable income supplement program many Canadians will have contributed throughout their working life. The amount you receive each month will depend on how much you’ve contributed to the program over time — naturally the more you put in, the more you get back.
Old Age Security (OAS) is different from the CPP in that these monthly payments are not dependent on contributions or working history. Once you turn 65, you become eligible for OAS. Seniors that report above a certain income threshold however ($79,845 in 2020), become subject to a pension recovery tax. That claw back amounts to 15 cents for every dollar of net income above the threshold in the following year’s OAS payments.
While Canadians can technically retire at any age, the key number to remember for tax purposes is 71. This is the age where all RRSP savings you’ve made must be converted into a Registered Retirement Investment Fund (RRIF). Essentially, this is set up as an income vehicle to help you throughout retirement.
Retirees must make a minimum annual withdrawal out of their RRIF, which increases each year until you turn 95. These withdrawals are taxed as ordinary income, and any amount withdrawn above the minimum rate will be subject to a separate withholding tax.
H&R Block is here for you at every stage in your life. No matter what your life or work situation is, or your preferred filing method, an H&R Block tax expert can make your taxes simple, helping you get through anything life throws your way.