If I earn extra income, how do I report this on my tax return?

Medical students and residents are a busy bunch. With long hours and a hectic schedule, figuring out your tax filings can slip down your priority list.

Medical students and residents typically ask about five topics: deductions against your income, moving expenses, impact of extra income, reducing taxes on salary and the benefits on incorporation.

In a five-part article series, we are looking at each of these topics, providing guidance for you to maximize your money.

If I earn extra income, how do I report this on my tax return?

Debt is a shared experience for many medical students and residents.

There are options for managing the debt. You can work at a part-time job, take on moonlighting shifts or rent out a room to help increase cash flow. These sources of income need to be reported on your personal tax return but there are also additional expenses that can be claimed against this income.

In the case of a part-time job, your employer provides a tax slip for the income received. This is required to be included on your personal tax return. Deductions from this type of income are limited to only those expenses your employer deems necessary to perform your duties. As such, a signed T2200 Declaration of Conditions of Employment form should be requested and kept on file for support that the expenses were required.

On the other hand, moonlighting fees are paid as self-employment income. Any expense deemed necessary to earn this income by the taxpayer could be deducted from these fees. This provides a bit more flexibility to claim expenses incurred that would otherwise not be deductible against employment income.

You are also required to report income earned from renting out space in your residence or through short-term rental sites like Airbnb. Additionally, household expenses such a portion of utilities, property tax, insurance, and mortgage interest, or in the case of a sublease, rent can be deducted. The percentage to claim is typically calculated as the portion of the square footage that is rented compared to the total square footage of the property. As with any other claim against personal income, it is important to keep all invoices and receipts for expenses claimed against rental income in the case of an audit.

To learn more about items you can claim against rental income, visit the Canada Revenue Agency’s website. For guidance specific to your situation please consult with your personal tax professional.

Did you know that MNP offers free personal tax returns for medical students and residents? To see if you qualify for the program, or for more information on how MNP can help you with your taxes, please contact Melanie Langevin, CPA, CMA at 613-691-4226 or [email protected].