Tax Credits for Millennials: A Path to Financial Freedom
Navigating adulthood can be challenging, especially for untapped tax credits millennials who face unique financial obstacles. With soaring student debt averaging $26,819 and high housing costs consuming a significant portion of their income, millennials may find themselves questioning the elusive concept of “financial freedom” they grew up hearing about. However, the good news is that despite the different landscape compared to their parents’ generation, financial freedom is attainable. One effective approach to achieving it is by leveraging the available tax credits.
Unclaimed Tax Credit:
Unfortunately, many millennials overlook valuable tax credits, unknowingly leaving money on the table. By familiarizing themselves with these credits, millennials can optimize their financial situation and retain more of their hard-earned income.
- Education-Related Credits: Millennials burdened with student debt can benefit from education-related tax credits, such as the Lifetime Learning Credit or the American Opportunity Credit. These credits provide deductions or refunds for qualified education expenses, including tuition and fees, reducing the overall tax liability.
- Homeownership Tax Credits: While housing costs may be a significant challenge for millennials, there are tax credits available for first-time homebuyers. The Home Buyers’ Amount and the First-Time Home Buyer Credit (where applicable) can help alleviate some of the financial strain associated with purchasing a home.
- Retirement Contributions: Millennials often overlook the long-term benefits of contributing to retirement savings. By maximizing contributions to individual retirement accounts (IRAs) or employer-sponsored plans like 401(k)s, millennials can not only secure their financial future but also reduce their taxable income through valuable deductions.
- Healthcare-Related Credits: Understanding healthcare-related tax credits is crucial for millennials, particularly those without employer-provided health insurance. The Premium Tax Credit, for example, helps offset the cost of health insurance premiums for those who qualify based on income and family size.
- Energy-Efficiency Incentives: Environmentally conscious millennials can take advantage of energy-efficient home improvements and receive tax credits as a result. Credits for energy-efficient windows, solar panels, or other eco-friendly upgrades not only reduce energy consumption but also provide financial benefits through tax savings.
Also read: Demystifying Income Taxes in Canada: A Comprehensive Guide
Overlooked Tax Breaks for Students: Maximizing Your Benefits
As a student, managing finances can be a challenge, but there are valuable tax breaks available that can lighten the burden. By being aware of these often-missed credits, students can optimize their tax savings and potentially receive much-needed refunds. This article explores three key tax breaks that every student should consider: tuition expenses, moving expenses, and professional or union dues.
- Tuition Expenses: The tuition credit is a major tax break for students, making it essential to track down the T2202A form, which outlines the tuition fees paid during the year. Even if students don’t need to use the full amount of credits in the current year, the unused portion can be transferred to a parent or grandparent. Alternatively, students can choose to save these credits until after graduation, providing a helpful financial boost in the form of a tax refund.
- Moving Expenses: If students need to move more than 40 kilometers to attend post-secondary school full-time, obtain a summer job, or run a business, they may be eligible to expense various costs associated with the move. These expenses can include transportation and storage, travel, temporary living arrangements, and incidental costs like utility disconnections. However, it’s important to note that claiming moving expenses generally requires being a full-time student, a recipient of taxable scholarships or grants, or having employment or business income.
- Professional or Union Dues: After graduation, many students secure great jobs that may require membership in a professional board or union. If associated fees are involved, students may be eligible for a tax credit. These fees can range from yearly dues for trade unions or associations of public servants to dues paid to professional boards as required by provincial or territorial law. Maintaining a legal professional status or fulfilling membership obligations can also be claimed for tax purposes.
Students should take advantage of the often-overlooked tax breaks available to them. By keeping track of tuition expenses, transferring unused credits, claiming eligible moving expenses, and utilizing professional or union dues credits, students can maximize their benefits and reduce their tax burden. These tax breaks provide valuable financial support during their academic journey and beyond. So, be proactive, gather the necessary documentation, and make the most of these opportunities to optimize your tax savings as a student.
While millennials face unique financial challenges, they can still achieve financial freedom by harnessing the power of available tax credits. By educating themselves about these often-missed untapped tax credits, millennials can optimize their financial well-being, reduce their tax burden, untapped tax credits, and retain more money in their pockets. By embracing these opportunities, millennials can take meaningful steps towards financial freedom and navigate the path to a more secure future.
Also read: The Role of Professional Accountants in Cloud Accounting for Canadian Businesses
Major Updates for Canadians in the Federal Budget
The federal government unveiled its fourth budget on March 19, 2019, featuring a range of new and revised tax credits specifically tailored for Canadians and major updates. Here, we highlight some of the key updates that will have the greatest impact on Canadians’ tax obligations in the coming year.
Exciting Updates in Canadian Budget: RRSP Home Buyers’ Plan, Education Tax Credit, Medical Marijuana, and Digital News Subscriptions
Get ready for some noteworthy changes in the Canadian budget! As of March 19, 2019, the RRSP Home Buyers’ Plan has raised its withdrawal limit from $25,000 to $35,000, giving home buyers a reason to celebrate.
In a bid to encourage lifelong learning, a new refundable tax credit will be introduced, assisting mature taxpayers by covering up to half of their training-related tuition costs. Here’s how it works: Canadians can accumulate $250 annually towards their tuition expenses, enabling them to utilize these funds to cover half of their tuition fees. For instance, if someone like Trisha has $1,000 in her account by 2024, she can claim up to $750 towards her $1,500 tuition fees, leaving $250 for future courses.
Taxpayers who possess medical prescriptions for marijuana need not worry about the change in its legal status. The government has confirmed that they can still claim the cost as a medical expense, providing reassurance to those who rely on this treatment.
In a digital age where news consumption has shifted, the government empathizes with the challenges faced by readers. To support the availability of quality journalism, a temporary non-refundable tax credit will be initiated. Eligible digital news subscriptions, belonging to Qualified Canadian Journalism Organizations, can be claimed for up to $500 in subscription costs annually, resulting in a maximum untapped tax credits of $75 per year.
These updates bring exciting prospects for home buyers, learners, medical marijuana users, and avid news readers across Canada.
Home Buyers, Education, Medical Expenses, and Digital News Subscriptions
In the latest federal budget released on March 19, 2019, several significant changes have been introduced, impacting Canadians in various ways. Let’s take a closer look at some of the key updates:
- RRSP Home Buyers’ Plan Expansion: Homebuyers have a reason to rejoice as the withdrawal limit for the RRSP Home Buyers’ Plan has been increased from $25,000 to $35,000. This means that eligible homebuyers can now withdraw up to $35,000 from their RRSP to use towards the purchase of their first home.
- Encouraging Lifelong Learning: To support ongoing education, a new refundable tax credit has been introduced for mature taxpayers. This credit covers up to half of the tuition costs associated with training and education. Each year, eligible individuals can accumulate $250 into an account, and they can then use the funds in the account to cover up to 50% of their tuition expenses. This credit applies to taxpayers with a working income of at least $10,000 and up to the maximum tax bracket threshold for the year, which was $147,667 in 2019.
- Medical Expense Claims for Medical Marijuana: Despite the legalization of marijuana in Canada, individuals with medical prescriptions can rest assured that they can still claim the cost of medical marijuana as a medical expense. The government has confirmed that this expense remains eligible for tax deductions.
- Tax Credit for Digital News Subscriptions: In a bid to support journalism and media consumption, the government has introduced a temporary non-refundable tax credit for eligible digital news subscriptions. Under this credit, individuals can claim up to $500 in subscription costs per year, providing a maximum tax credit of $75 annually. The news outlet must belong to a Qualified Canadian Journalism Organization to qualify for the credit.
These updates aim to bring positive changes to Canadians’ lives, from home buying and education to supporting digital journalism and medical expenses for untapped tax credits.