As a new parent, it's essential to understand the tax implications of your new status. There are several tax breaks and deductions that you may be eligible for, and it's important to know what they are to take full advantage of them. In this post, we'll go over five tax tips specifically for new parents, so whether you're just starting as a parent or looking for ways to reduce your tax bill, read on for some helpful advice.
1- Understand the Basics of the Tax System
The tax system can be confusing, but it's essential to understand the basics. The good news is once you have a handle on the basics, it's not that complicated. Here are a few things you should know:
- Your tax rate is based on your income, and you must file a yearly return. Your province or territory of residence determines the amount of tax you owe.
- There are many deductions and credits that can lower your tax bill, and it's crucial to take advantage of them if you can. For example, you may be eligible for the childcare expense deduction if you have children.
Taking the time to learn about the tax system will save you money in the long run. So don't be intimidated by all the rules and regulations—just take it one step at a time, and you'll be an expert in no time!
2- Know What Expenses Are Tax Deductible
As a new parent, it's essential to be aware of tax-deductible expenses. This way, you can take full advantage of any deductions you are entitled to and save money come tax time!
Here are a few examples of expenses that can be deducted:
- Childcare expenses: As you read above, If you are paying for childcare so that you can work, a portion of those expenses may be deductible.
- Education expenses: If you are taking courses related to your job or business, you can deduct the cost of tuition and textbooks.
- Medical expenses: Some medical expenses, such as prescription drugs and therapy, may be deductible.
Remember that these are just a few examples – for a complete list of deductions, Check out our professional personal tax accountant in Toronto.
3- Keep Good Records
One of the main benefits of keeping good records is that it can help you prepare your tax return. Good records will help you determine your filing status, calculate your taxable income, and determine which credits and deductions you qualify for. Good records can also help you file your return electronically, saving you time and money.
Another benefit of keeping good records is that they help you track your expenses. Keeping good records can also help you monitor your spending and ensure you pay the appropriate taxes.
Keeping good records can also help you plan for your financial future. If you know how much money you have coming in and going out, you can make better decisions about how to save and invest your money. Good records can also help you track your progress toward financial goals, such as saving for retirement or buying a home.
4- Stay Organized Throughout the Year
One of the best things you can do for your finances is to stay organized throughout the year. This may seem daunting, especially if you’re a new parent, but it’s pretty simple.
Here are a few tips to help you get started:
- Keep all of your critical financial documents in one place. This could be a physical folder or an electronic folder on your computer.
- Make sure to keep track of all of your income and expenses. This can be done through a budgeting app or software or simply by using a pencil and paper.
- Stay on top of your bills and payments. This includes setting up automatic payments when possible and always knowing when a bill is due.
- Invest in a good financial planner. This is someone who can help you make sense of your finances and set up a plan for the future.
- Finally, don’t forget to save for retirement! Even if it feels like a long way off, it’s never too early to start planning for your future.
5- Hire a Personal Tax Accountant
As a new parent with tons of new responsibilities, hiring a personal tax accountant in Toronto is your best option. They can provide you with all the services above while you give your newborn all the attention. Hiring one has many benefits for newlyweds and even new parents. So whoever you’re, you should look into one as they are guaranteed to make your finances more straightforward and stress-free. Click here if you’re interested in hiring a personal tax accountant.
Conclusion
That's it! Now you know five personal tax tips for new parents. By following these tips, you can ensure you're getting the most out of your tax return. And who doesn't want that? So what are you waiting for? Get started on your taxes today!