Every student likes to believe that once they reach that light at the end of the tunnel known as graduation, their money troubles will disappear. I mean if you survived on earning basically nothing as a student, getting paid in your new career should be a real windfall right? Maybe it’s time to Treat Yo Self? Uh… I hate to let you in on this secret but…
It doesn’t always work out that way. In fact, today fewer and fewer students get to live happily ever after once donning the cap and gown. Once you do start earning some real money you’ll quickly find meet the taxman and learn just what an expensive acquaintance he can be. At the same time you’ll wonder where the heck all your money is going. How can you possibly make $X a month and still have nothing left for savings at the end? Well, you needed that new car right, after all, you had taken public transit the whole time you were a student. You had promised yourself you’d go out to each a little more as a reward for all your hard work… And then there’s those stupid student loan payments that get taken out every month.
Raise Your Hand If You Pay Enough TaxesThe bottom line is that if you’re like most Canadian students you’ll be able to use a hand up as you begin to establish yourself your first few years out of school. If you want to delay meeting the taxman for a little while longer, you’re probably in luck. Most recent graduates have a few left over tax breaks that they are eligible for. Caution: Don’t continue reading if you’re against large tax refund cheques coming to your mailboxes. (I always wanted to try writing cheesy inbox subject lines just to see if it actually worked – let me know how I did!)
1. If you have graduated recently and have had to start repaying student loans, provincial and federal tax credits are available for the interest you’ve paid on those loans. Because of the tax-deductibility status of student loans, some smart people prefer to put their paycheque towards other endeavours for the first few years they work. Paying back credit-card debt and lines of credit should definitely come before putting any extra money towards student loans. There is also a solid argument to be made for beginning to save for a house down-payment, or even beginning retirement savings, as opposed to focusing on paying down your student debt. This subject is much debated by finance enthusiasts, but they agree on one thing: you’re crazy if you’re paying student loans and not getting the tax break designed to help recent graduates. If you have to pay the government for lending you that cash you used to buy tequila shots with you might as well use it to your advantage.
2. Many provinces now have tuition-payback tax incentives to encourage you to work in the province where you earned your degree or diploma. This is so that the province can benefit from the training it funded when you were in school. In Manitoba, for example, ten percent of your total tuition costs will be paid back to you each year, for up to six years, through a tax refund. New Brunswick and Nova Scotia have similar programs with Saskatchewan’s being the most generous of them all.
3. If you did not use the tuition, education, and textbook tax credits, and did not let your parents use them either. You can have them “carried forward” to a year when you have more income that has been taxed (i.e. when you start working). I definitely recommend carrying forward at least some of the amounts in your last few years, in preparation for your first year out of post-secondary education, when you’ll really need the big tax refund to pay for the seemingly endless barrage of expenses.
Related: How Much Does School Cost?
The Taxman is a Persistent Dude
Eventually you’ll have to pay the piper, but if you can keep as much of your money as possible when you’ve just graduated for school this is obviously in your best interests. You can use it to pay down debts (definitely any credit card debt and/or lines of credit) or start beginning to save for a down payment on a house. It’s pretty straightforward to claim this stuff if you do your own taxes on Turbo Tax. If you pay someone to prepare your taxes for you, you should definitely make sure they’re aware of any amounts you claimed as a student (just bring them your old tax slips) and any provincial tax incentives that might apply to you.