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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.
Cash flow planning is a very critical process for medical students and residents as attending school usually leads to a large amount of debt. When these students begin to earn either a salary or fee for service income, the biggest goal most students have it to pay down their debt as soon as possible. The best way to manage debt and cash flow is to sit down with a financial planner. However, here are a few easy items to consider to increase cash flow.
The easiest way to reach this goal is to work more. This doesn’t have to mean working more at your main job. Consider moonlighting, working as a locum, Airbnb rentals or subleasing. As discussed in the previous article, you need to report the revenue from this income, but there are additional deductions available for these expenses. This can limit the taxes payable on this extra income as well.
The next option is available only to those who are earning salary income. The Canada Revenue Agency (CRA) created a form that provides employees with the option of identifying the credits they qualify for and allows their employer to reduce their taxes deducted at the source of income. This is known as the T1213 Request to Reduce Tax Deductions at Source form. Possible deductions include RRSP contributions, child care, support payments, employment expenses, medical expenses, donations, moving expenses and carry-forward tuition credits.
For most medical students, the form is useful for about two years of residency depending on the tuition credits available and the income they earn annually. If you deplete your credits during the year, you may owe taxes in April. This is generally not an issue if you monitor the credits closely.
Learn more about completing this form by visiting the CRA’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
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