Monday, June 27, 2011

Got a summer job? Here are a few financial planning tips just for you

Learning is necessary … and expensive. But you know that. It’s why you put in so many hours hitting the books. And why your summer isn’t a vacation – it’s valuable time to make the money you need to help fund your education.

So it only makes sense that your summer job should pay off in every way possible. Here are some financial planning tips for getting the most from your summer employment cash*.

Give yourself all the credit Tax credits directly reduce the actual amount of your federal taxes and, in many cases, your provincial taxes, as well. As a student, you are eligible for these credits:
  • The Canadian Employment Credit on the first $1,000 of your employment income.
  • Tuition, Education and Textbook credits for tuition fees of more than $100 per year, for education costs of up to $400 for each month of enrolment for full-time students (or part-time students with a disability) and $120 a month for part-time students, and textbook costs to a total of $65 a month for full-time students and $20 a month for part-time students.
  • A Public Transit Pass Credit for monthly or longer transit passes. You will need receipts to make this claim.
Get a tax reduction through deduction Tax deductions like these reduce the amount of your income that’s subject to tax:
  • Moving expenses – when you move more than 40 kilometres to be closer to school or for your summer job.
  • Child care expenses – can be claimed by a higher-earning spouse or common-law partner when the lower income partner is enrolled in a qualifying secondary or post-secondary program.
Take an interest in saving You are eligible for a tax credit on interest paid for a loan that is part of a federal or provincial student loan program but has not been renegotiated with a financial institution or consolidated with other loans. If you have no tax payable in the year the interest is paid, you can carry forward the unused credit and apply it in any of the next five years.  

Save for emergencies … and your future You can contribute up to $5,000 to a Tax Free Savings Account (TFSA) each tax year. Your contribution isn’t tax deductible but money and interest inside a TFSA is tax-free and so are withdrawals, which can be made at any time for any purpose – such as providing emergency cash for unexpected education costs.

Find out about even more tax-saving strategies by talking to a professional advisor.  

* Information in this article is based on federal rules only. Provincial and territorial rules may differ.

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