It's Your Money  

Tax tips for all stages of life

There is only three weeks left until the tax-filing deadline, yet I haven’t even started to put my own tax file together to send off to our accountant.

You would think that a financial professional would be all over this, but the truth is, I hate filing my taxes just as much as the rest of you. 

But just because I am waiting until the last minute does not mean that I won’t file my taxes on time or won’t make sure that I am structuring things as efficiently as possible to pay less tax. And I certainly hope that the rest of you will do the same.

With the deadline a few weeks away, I thought it was worth one more tax-related column to highlight some last-minute tax planning ideas that people in different stages of life should do in order to make a big difference: 

Teenagers — Most teens don’t earn enough money to be required to pay income tax and they generally don’t have to file a tax return. But even though they don’t have to, they likely should.

The minimum earned income for 2019 to pay tax is $12,069 and most teenagers who work will likely earn under this amount. That income does, however, still create RRSP contribution room and even though the teen may not plan to contribute to an RRSP right away, filing a tax return will lock it in.

The room will accumulate and carry forward and their future self will be very thankful for the extra room to use for tax planning down the road.    

College Students — There are similar benefits to filing a return for college students even if they also don’t need to do so. A college student will also have the $12,069 basic tax-free amount, but they can additionally claim tuition payments and even transfer certain credit amounts over to their parents.

Those students drawing out RESP funds and also working part time or in the summer need to be sure that they’re managing the RESP withdrawals properly to minimize any taxation issues. 

Working Years — A poll was released the other day that showed most Canadians still see a tax refund as a windfall instead of as their own money being paid back to them. The reality is that a tax refund is really just the result of poor tax planning.

While not much can be done for this year’s filing, those employees with fairly stable income should look at this year’s return and if they are getting a refund yet again, consider filing a T1213 form.

This CRA form is used to “Request to Reduce Tax Deductions at Source” and once approved, can authorize your employer to reduce the amount of tax withheld at source for 2019.

Reducing the tax withheld at source will allow you to re-deploy the extra money on a monthly basis directly into debt reduction or retirement savings.

Retirees or Soon to Retire — For anyone over age 65, make sure that you are claiming the pension income tax credit. Even if you’re still working, this credit will allow you to withdraw $2,000 per year from a “pension source” tax free.

If you don’t have a pension and aren’t ready to convert your RRSP account over to a RRIF, you can still convert a small portion of the RRSPs over so that you have enough to pull at least $2,000 out each year.   

Benjamin Franklin once said that “In this world nothing can be said to be certain, except death and taxes.”

So if you have to file your tax return, you might as well file it on time and do it right.


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About the Author

Brett, designated as a chartered investment manager and certified financial planner, is the regional director (Okanagan) for IG Wealth Management.

In addition to his “day job," Brett was appointed to the board of directors of FP Canada (formerly FPSC) in 2014, named as the board’s vice-chair in 2017 and will take over as board chairman in June. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations for the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FP Canada board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected].

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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