Tax Fun: Moving Costs for Students

Today (April 30th) is usually the last day of the lease for students, especially those about to graduate.

The trick most landlords get students to do is to sign their lease so that they must pay for the summer months if they want the rental for the next school year (and except in a few University towns, there is little chance of subletting those rentals), thus their lease usually ends on April 30th.

The one thing for those graduating students to remember is that if they are moving out of their University living quarters and are moving to a new city to get a job, that is a moving expense, that is deductible (unless  your employer reimburses you for it, then it also becomes income too).

Graduates Moving

Graduates Moving Costs

What does the CRA say exactly about this?

Who can claim moving expenses?

If you have moved and established a new home to work or to run a business at a new location, you can claim eligible moving expenses.

You can also claim moving expenses if you moved to take courses as a student in full-time attendance enrolled in a post-secondary program at a university, college, or other educational institution.

To qualify, your new home must be at least 40 kilometres (by the shortest usual public route) closer to your new place of work or school. Complete Part 2 of Form T1-M to determine if you meet the distance requirement to claim your moving expenses. If the result on line 3 is less than 40 kilometres, you do not qualify to claim your moving expenses.

You must complete a separate Form T1-M for each eligible move and enter on line 219 of your return, the total of all amounts from line 23 in Part 4 of each form.

Can you claim this every year if you move back home and then back to school? I don’t think so, however, if you graduate from one school and then start at a new school (in a different city) that might be a very different story.

Oh and your taxes are due very soon as well!

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Tax Haiku

I spent today finishing my taxes, and this is where my brain ended up, with an Income Tax Haiku:

Tax time coming soon,

Ensure all credits are there,

I keep my money 

Keep that in mind doing your taxes

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Myths About Your Taxes

After reading countless similar posts allow me to add my own obtuse point of view on doing your taxes and what I have observed over the years from various friends and acquaintances and some of their misinformation about the CRA and Income Tax.

If you don’t owe money, you don’t need to worry about getting your taxes done in time

First, how the heck do you know that you don’t owe money, if you haven’t done your taxes? If you have done your taxes, and know you don’t owe money, then why don’t you just file your taxes?

Yes, usually the CRA won’t hunt you down if they owe you money, but why do you want to loan the CRA (and thus the government) money if they owe you money?

If you are so bloody sure that you don’t owe money, then do your taxes and be done with them! Do you not do your laundry because you have enough money to buy more clothes?

The CRA doesn’t Have the Same Powers as the IRS

Don’t Mistake the CRA for this Guy (courtesy Rankin-Bass Entertainment)

This is true, and a very good thing, since the IRS scares the living crap out of most normal thinking human beings. If the IRS ever took an interest in me, I’d curl up in a ball and hide under my bed, however, don’t mistake the CRA for a toothless Abominable Snowman either, they can make your life quite miserable if they so choose (and you owe them money). I have received about 5 “we’d like to receive your receipts” letters so far, and each one caused all my sphincters to clench tightly each time I opened the letter (even though I knew I had done nothing wrong).

Simple rule of thumb for most of the world, Don’t Piss Off the Tax Folk!

You Only Have to Scan Your Receipts

I wouldn’t do that if I were you, and you should keep all your receipts for 6 years (at least). You may be able to submit receipts for a “receipt check” on line, but they will want originals for an actual audit.

The CRA Employs Evil Trolls and their Help Line is Mean

Far from it, this is a myth, I work near a CRA office and I have yet to see a single Troll walk into the building, and I have only had very good conversations with their help line folks. Michael James has in fact got helpful hints from the help line (if I remember correctly) so if you aren’t sure call them (but right now, yes you are going to have to wait a while on the line).

My Cousin Did My Taxes He is Liable if Anything is Wrong

Um, no, these are your taxes, and while you could try to claim incompetence as a defense for a bad return, you are in the end responsible for your own return. You have to pay extra to have TurboTax come in with you if you use their software and you are audited, but at the end of it, the buck stops at you!

Everyone Cheats on their Taxes, It’s Expected

What are you nuts? ’nuff said on that, don’t claim your cat or dog as a dependent, don’t claim tuition for kids that don’t exist and don’t input bogus numbers from your T-4’s, you will get caught! It might be funny to have someone post a comment how they didn’t get caught, so if you have, drop me a line.

Let’s hope these helpful hints get you thinking about your taxes.

 

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RRSP Deadline Let the Taxes Begin!

Today is the end of the RRSP season (I dropped by my bank to deposit a cheque, and saw that there was still mayhem and such).  You can still today “do your RRSP” if you wish, or you can wait until next year, but after today this is all over, now is when you need to start your taxes (if you were lucky you got a free On-line copy of Quicktax from me, or maybe Ufile from a bunch of other Fin Bloggers).

I spent Sunday going through my box of receipts (and my Quicken as well) looking for expenses and important receipts (yes, and I finally finished Mad Men Season 6, but that has nothing to do with this (except I am less likely to be quoting Roger Sterling)). Every year I check my previous year Tax Return to remember the things I am doomed to forget, and so far I have tripped across a few very useful things I might have forgotten.

  • My Safety Deposit box charge, however, that is no longer deductible, but I remembered not to claim it, so I think that counts as a good thing.
  • My bus pass costs, but again, I didn’t take the bus last year, so that one is a miss on my part .
  • Collecting all my daughters’ tuition receipts and T-4’s for bursaries is never easy, and rarely available before the end of February, but I think I have them all (from 3 different schools, even though I only have two daughters in University currently).
  • All of the medical fees for my son, he sees an Occupational Therapist which is not covered by my benefits and of course School Fees because he is Disabled. These are important to get in there, and get right too.

For most folks, you should be able to submit your taxes on-line, since all you really need is your T-4 and a few receipts, but for me I must be diligent to make sure I have all the forms I need to get my taxes right, so always ask yourself, am I missing any receipts or forms?

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How Much is $1 Earned Worth ?

I will leave the philosophical discussions out of this about whether we are being paid sufficiently or whether a dollar is worth what it should be worth, the more interesting discussion is, what is $1 earned actually able to buy after it gets into my grubby hands?

First you must pay your income tax on that $1 earned (let’s leave out investment income, maybe save that for a different day), but you also need to pay your EI and CPP premiums on that poor earned $1 as well.

The Diminishing Dollar Earned
Income Earned $1.00
Federal Tax $0.24
Ontario Tax $0.08
CPP $0.05
EI $0.01
Take Home Pay $0.62
HST $0.08
Actual Dollar Value $0.54

 

So my $1 earned is really only 54 cents? Yes, I have made some assumptions

  • Provincial income tax is about 8.65% in Ontario for someone making between $50K and $90K
  • Federal income tax rate is about 24% for the same bracket
  • The HST in Ontario is 13% (which you will have to pay on most things you buy these days)
  • All deductions, and tax lowering capabilities are ignored to make for a much more dramatic number
Money, Coins, Pennies

A Penny Earned is Really a Half-Penny?

So here we have 54 cents for every dollar earned. If I want to go out and buy a nice Big Screen TV for Christmas (because I deserve it), let’s assume this monster is going to cost $1100.00, this means I have to earn

$1100/0.54  or $2037 to buy that TV

A better number for this simulation might be 65 cents, but at the end of it, many folks get tripped up when they think about their Income as a Gross Income number, when in fact they really should be thinking about what their Net Income is. What is Net Income?

Net Income = Gross Income - Provincial Tax - Fed Tax - CPP - EI - Insurance Costs - Benefits costs - Other income expenses

The last time someone told you how much they made as income, did they tell you their Net or Gross Income? Gross of course, no one wants to think about how much they really earn.

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