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Lessons In Finance: Teen Tax Tips

Ah, April, that beautiful time of year when the snow melts away and things are supposed to warm up.
April is also tax season for Canadians. With that in mind, this lesson in finance will examine income taxes from a teenage perspective.
For the 2018 tax year, the basic personal tax exemption is $11,809. If you earn under this amount, then you don’t have to pay federal income taxes. Some employers, however, will deduct income taxes from students’ paycheques if the gross pay they earn, pro-rated for the year, is greater than the exemption limit. Many students who only work during the summer months are in this situation.
If, for example, a student earns $2,000 a month during July and August — but does not work the rest of the year — their employer will deduct income taxes from their paycheque even though they are earning below the exemption limit. To the employer, the student’s monthly earnings equate to $24,000 (12 months times $2,000). This amount is above the exemption limit, and therefore tax is deducted.
If a student, or anyone for that matter, doesn’t want any income tax deducted, they can give their employer a downloadable TD1 form indicating that their total annual income from all sources will be less than the current basic exemption limit.
By doing this, students can get all of the money they have earned right away, rather than having to wait for it in the form of a tax refund. If you are earning under the exemption limit, there is no point letting the government hold your money — they don’t pay interest on it. Get it in your hands so you can use it, following the financial lessons you already learned.
Even if you don’t owe taxes to the government, you should still file a tax return. The federal and provincial governments offer some refundable tax credits, which can be payable even if you have little or no earnings. These credits are always changing, and you may not qualify, but you will never get them unless you file. If you are 18 and older, you can apply for the HST tax credit: this is money that the government sends you directly as compensation for all the HST you have been paying as a person with a low income. You must be 19 to receive the credit, but if you will turn 19 before April 1 of the following year, you can apply now to get your first HST payment as soon as possible after you turn 19.
Get the rest of lesson at substack

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