9 ways gen Z and millennials can keep wealth from the taxman #CanadaFinance

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As Canadians get ready to welcome in the New Year, it’s important to take advantage of certain tax saving opportunities before the clock strikes midnight on Dec. 31.

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While wealthier individuals and families can deploy squads of accountants to sift through their tax details, looking for end-of-year tax savings is just as worthwhile for people with more modest wealth and incomes, such as some gen Zers and millennials.

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Here are nine end-of-year tax tips.

1. File a tax return, even if you’re not earning much. This may not be obvious for younger workers, or those with low income, but it is important to make sure you file a tax return each year, even if you don’t have to pay tax or earned a minimal amount because you were a student or just entered the workforce. Filing ensures that you will receive any government grants or payments you may be entitled to. This will also provide you with a Notice of Assessment, which is important for, for instance, knowing how much you can put in registered savings accounts. You can save money by filing your taxes yourself, and if you file online, use NETFILE-certified tax software.

2. Gig workers, track your work and work your deductibles. “A lot of gen Z-ers and millennials work in the gig economy and have more than one source of income. If that’s you, one thing you should do before the end of the year is to keep track of your income from all the places you’ve worked,” says Darren Coleman, senior portfolio manager at Raymond James Ltd. in Toronto.

Whether you use a paper planner, online calendar, spreadsheet or an app on your smartphone, keep a running list of the service you’re providing, who you are providing them for, the hours you worked, when you were paid and whether the amount you were paid is correct.

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You will need to fill out a Form T2125, and if you make more than $30,000, you will likely need to start charging goods and services tax or harmonized sales tax.

Then take a look at any expenses that are related to your work. You may be able to deduct a certain portion of some, such as home office costs, vehicle expenses, supplies, and marketing and professional fees. And end-of-year purchases give you more deductibles for this tax year.

3. Put savings into a TFSA to keep more of your growth. Every Canadian taxpayer can contribute up to $7,000 this year to a tax-free savings account (TFSA). You can open a TFSA at most financial institutions and can hold most types of investments in your fund, including cash, mutual funds, exchange-traded funds, guaranteed investment certificates and bonds, and as the investments grow, that growth is not taxed. If you haven’t contributed the maximum amount in earlier years, you may have additional contribution room. If you’ve never opened a TFSA, turned 18 in 2009 and have lived in Canada since that year, you can contribute up to $95,000 to make up for previous years. Be careful of your timing when you take money out of your TFSA, though: There are restrictions on how much you can put back into the fund in the same year as you make withdrawals.

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4. Save on taxes now through an RRSP. You can defer taxes for years by opening and contributing to a Registered Retirement Savings Plan (RRSP). You can open an RRSP at most financial institutions and your contributions can include cash, guaranteed investment certificates, bonds and funds. Unlike a TFSA, the growth in your fund is taxed when you take it out, usually at retirement. If you earn less in retirement than during your prime earning years, your earnings will be taxed at a lower rate. Check your last year’s Notice of Assessment to see the exact amount you can contribute, as there are penalties if you overcontribute. You actually have until March 1, 2025, to contribute to your RRSP for 2024, but there are advantages to doing it before the end of the year, such as the money compounding for longer, Coleman says.

5. Get more for your kids’ education through RESPs. Postsecondary education costs keep rising, with the yearly average tuition at $7,360. Registered Education Savings Plans (RESPs) help by both sheltering some of the money you save for your kids’ education from taxes, and giving savings a boost through grants from the government. It’s important to contribute to your children’s RESP before the end of the year to get this year’s government grant amount. The maximum lifetime contribution for each child is $50,000; the federal government kicks in $500 each year you put in $2,500. This money is taxed when the child withdraws it, which likely means lower taxes on the savings.

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6. Keep more for a first home through an FHSA. If you’re saving for your first home, you can open a First Home Savings Account and contribute up to $8,000 a year for 15 years, to a maximum of $40,000. Your money in the fund grows tax-free. First home buyers can also borrow up to $60,000 from their own RRSPs to use for a down payment without attracting any taxes, but they have to repay their fund within 15 years.

7. Feel better about medical expenses. Publicly funded health care doesn’t pay for everything. If you don’t have a drug plan, you probably need to pay out of pocket for items such as glasses or prescription drugs. While you can deduct legitimate medical expenses for yourself and dependants, there is a formula, which can work out to more than $2,000, to determine how much you need to pay yourself — the lesser of three per cent of your income or $2,759 for the 2024 tax year — before being able to claim medical credits.

8. Give and get back. You can get tax credits for money or shares you donate to charities registered with the Canada Revenue Agency (CRA), as well as donations to political parties. If you donate in 2024 you can get the credits next year; if you donate in January you have to wait until 2026.

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9. You are unique. Your claims may be, too. Are there any credits or deductions you have missed? Maybe, and you should check, says Coleman. “I call these credits ‘boutique’ items — things like credit for fitness memberships, kids’ sports programs, public transit that have made their way into the tax code. There are a lot of them. They add up and they may apply to you,” he says.

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