Post

How I Do Our Taxes

It's everyone's favourite time of year personal income tax filing!

Personally I don’t mind doing my taxes as it is almost like a mini year in review.

Sure it can be annoying when you see that the total taxes and other deductions but hopefully you are satisfied with the income amount!

For me tax planning starts around the same time as our financial plan for the year. A couple weeks ago we did post covering that. At this point I use the concept of pay yourself first and allocate my contributions to my RRSP and TFSA.

For those with a high savings rate you definitely want to login to your my CRA portal and confirm that you have adequate space.

Also if you took advantage of the first time home buyers plan, like I did, you should note the amount that you must pay back. If you don’t it gets added back to your taxable income for the year as if you took the money out without utilizing one of the tax free options.

Throughout the year you are bound to acquire some receipts. I suggest taking a picture of each and saving them into an organized folder. I have been doing this since 2018 and let me say it is really handy come tax time.

Now there are many things you should keep track of but the main ones I do are:

  • Medical receipts like I had 1 for crutches and another for my air cast from when I broke my leg in February 2024
  • Donations to charities (I believe you get 15%)
  • Political donations (I believe you get 75%)
  • RRSP summaries
  • OSAP interest paid

Once the end of the year comes around I like to use the income tax calculator (previously simple tax but WealthSimple bought them a few years back). Simply take your last paystub of the year look at the YTD columns and fill in your values. After that enter your RRSP/FHSA contributions for the past 10 months and what your anticipated contributions for the first 60 days will be.

Simple Tax Calculator

Out comes your anticipated return or amount owing. Hopefully it is the former, however, as noted earlier you still have about 60 days to contribute more to RRSP to improve your return.

Once I’m satisfied I like to take a screen shot and you guessed it store it in my tax folder for the year. It can come in handy down the line!

Once February comes around the following year we are organized and only have to wait for our T4s to come in.

Personally I have filed my taxes with:

  • pen and paper
  • a professional
  • a program that used to be available on the CRA’s website (I cannot recall the name) it was awful
  • WealthSimple Tax
  • TurboTax

It doesn’t really matter which method you use as long as you are capturing everything you need to. The nice thing about the last two in the list is that they each have a optimize / review which can help squeeze out that extra little bit.

Earlier in the article I suggested using the Simple Tax Calculator to get a ballpark of what your return should be. Well this year it helped me catch a mistake. As I was inputting my information and nearing the end I noticed the expected return feature was reporting several hundred dollars less.

After digging in further I found out that the issue was I had typed in my HBP repayment into the incorrect box. Thus it was assuming that I was not paying the required portion back this year meaning it was being added to my income for the year and thus more tax.

After fixing this I was within $100 of the Simple Tax calculators value.

Fortunately or unfortunately depending on how you look at it but from a tax perspective the fact that I am still working on my tax advantaged accounts I don’t have much else to enter in terms of income.

Being married we find it easiest to file jointly. While there are many advantages to filing jointly the main one we have at this point of our life is that medical deductions are grouped up and deducted off my partner’s and our charitable donations come off my side.

Finally all there is to do now is to wait for CRA’s NETFILE to open, which, is supposed to happen on February 24th. In the meantime I will be trying to determine what I want to invest my return into. What I do know is that it will be roughly 50/50 TFSA and RRSP. Another option would be to put some against my LoC (money taken in July 2024 to purchase BANK in my TFSA) which unfortunately is no longer at the teaser rate of 4.99%. Currently variable rate for the revolving is north of 11% 😢

Thanks for stopping by and I hope to see you back here next week!

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Cheers ☕

This post is licensed under CC BY 4.0 by the author.