Save money by filing your own taxes this year using one of the many do-it-yourself options out there. My favourites include QuickTaxWeb, the online version of the QuickTax software, and UFile, another well-priced option, both of which do your calculations for you. To get started, sort your receipts using the deduction categories (employment T4s, medical expenses, charitable donations) on your return. Write the name of each category on a legal-size envelope and use a three-hold punch to make them binder-ready. Voila! You’ve not only organized your 2004 receipts, you’ve also created a cheap and effective filing system for the future. To stay on track, set a monthly appointment with yourself to sort and file all your receipts into their category envelopes. When next year rolls around, you’ll be glad that you did.
Did you know that travel costs relating to medical care, oral contraceptives, contact lenses, laser eye surgery and many cosmetic surgery procedures all qualify as medical deductions? You can deduct expenses for any 12-month period ending in the tax year. If you’re married, maximize deductions by claiming all medical expenses on one return, preferably that of the lower-income earner. A similar strategy works for charitable donations, too.
Many of my clients ask how much they should contribute to their RRSPs. When income is greater than $35,000, my response is how much do you have? If the answer is zilch, consider borrowing – it will cost you much less in interest than you’ll save in taxes and you’ll be that much closer to financial freedom. Calculate the amount you can afford to repay monthly and run it past your bank or credit union lender. They’ll advise you exactly how much you’re eligible to borrow. If your income is less than $35,000, consider saving your money in a non-registered account and then transferring it to an RRSP when your tax bracket is higher. If you’re one of those rare Canadians with extra cash lying around, you’re limited only by your maximum allowable contribution.
There are few things sweeter than a tax refund. Although it’s tempting to blow it all on a spring vacation, why not make that money really work for you? Use it to pay off credit cards or other high interest, non-deductible debt. If you have any left over, begin to debt-proof your future by socking away the remainder of your return (and any other ‘found’ money, such as work bonuses and cash gifts from auntie Gertie) in a high-interest savings account until you’ve saved enough to cover six months of living expenses.
Consider a truly life-changing strategy for 2005: negotiate a four-day week with your employer at 80 per cent of your current salary and use the extra day to upgrade your education or start that small business you’ve been dreaming about. Many of the costs of both are tax-deductible, and as long as you organize your spending in advance, you’ll barely miss the difference in income!