Well, you’ve done it – you finished your degree in medicine! Now it’s on to the best part: starting your residency, changing lives, and making some money. As a new resident and member of the workforce, there are a few things to consider in regard to your taxes and finances. Nothing to worry about, though, because KBH Chartered Professional Accountants has got your back and we’ll make sure you’re well prepared come tax time.
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Moving expenses: If you had to move across country, or away from home to be closer to your residency then you may be able to deduct expenses against your income. There are certain things that qualify as moving expenses include, some are below but it’s usually best to speak to a professional:
- The cost of travel (if you moved over 40km away),
- Meals during your move,
- Packing and shipping expenses, and
- Any costs incurred to buy and/or sell a home.
Tuition: During your years as a student, you accumulated tuition credits. Now that you’re done school, these credits are available for you to use to reduce your tax bill.
Note: Be sure you don’t forget to use the last credits for the year you graduated! Any balances are tracked by the CRA.
Student loan interest tax credit: If you took out a government student loan and are required to pay them back during your residency, the tax on that loan can be included on your tax return to get an additional credit. However, interest on loans from other lenders (i.e. your bank) does not provide a tax credit.
Union dues: You are able to deduct any union dues payable to your professional society, as well as costs associated with obtaining and renewing your medical license, against your taxes.
Out of pocket expenses: If you moved to be closer to your residency and had to pay for some of your own travel, equipment or accommodations – and have not already been reimbursed for the expenses – your residency program can provide you with a T2200 that allows you to deduct eligible expenses on your return.
First Time Homebuyer: Look at you, buying your first home! Now, you can take advantage of the first-time homebuyers’ credit. The first-time homebuyers tax credit is a non-refundable credit that allows first-time purchasers of homes, and purchasers with disabilities, to claim up to $5,000 in the year when they purchase a home.
However, to be eligible for the credit, you must meet both of these criteria:
- You or your spouse or common-law partner purchased a qualifying home.
- You are a first-time homebuyer, which means that you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years.
Charitable donations: While you’re studying, any charitable donations you made may have not provided any tax benefits as your income was likely quite small. However, any of those donations made can be used for five years after the contribution was made – so you can now take advantage of these donations during your residency!
Investing: Investing and saving is always beneficial. However, during your residency a tax-free savings account (TFSA) is a better option than an RRSP. This is because any contributions made to your RRSP provides a direct deduction to your taxable income, but with limitations. Your TFSA is a wiser tool during your residency as the contribution limit is better suited to your income levels. When you’re done residency and are in a higher tax bracket, the RRSP becomes a more valuable investing tool.
Ask an accountant: Now that you’ve joined adulthood you actually have to start “adulting”! We all know that adulting can be tricky and keeping up with things like taxes and finances can stump even the best and brightest. That’s why having someone in your corner that has your best interests in mind to help ease the stress can make a world of a difference. KBH Chartered Professional Accountants can certainly be that person. The world of tax is a complicated one, don’t navigate it alone – we’re here to Help You Succeed.