Tax Season Doesn’t Have to Be a Headache: Run the Numbers, Save Big, and Learn as You Go!
It’s that time of year again—tax season is almost upon us ! Now, before you sigh, hear me out. I get it; doing taxes isn’t exactly thrilling. Most of us look forward to tax time about as much as a trip to the dentist. But what if I told you that doing your taxes doesn’t have to be a dreaded chore? In fact, it can even be a great way to learn about saving money, optimizing your finances, and reducing that tax bill.
I used to do my taxes the hard way—pencil, eraser, calculator, and lots of grumbling. I even paid someone else to do it for a while just to avoid the headache! Then I discovered the wonders of tax software, and my entire tax experience changed. Today, I’m here to tell you how you can make tax season simpler, less stressful, and maybe even (dare I say) enjoyable.
Why Tax Software Is a Game-Changer
Years ago, I bit the bullet and bought tax software (I use TurboTax). For around forty bucks, it promised to take all the grunt work out of filing my return. Little did I know, that forty dollars was about to change the way I see taxes forever. Not only did it make filing easy, but it also helped me learn—yes, learn—about how our tax system works.
Benefits of Using Tax Software
-
Quick and Simple Filing:
The software walks you through your return step-by-step, asking simple questions that make sure you don’t miss a thing.
-
Automatic CRA Integration:
If you’re filing in Canada, you can connect directly with the Canada Revenue Agency (CRA) and download your T-Slips automatically, which means less time hunting for forms and more time sipping coffee.
-
Real-Time Calculations:
As you go, the software shows your expected refund or balance owing, updating every time you add income, deductions, or credits. This makes it easy to see exactly how your numbers add up.
-
Run the Numbers:
You can even experiment with “what if” scenarios, like adjusting your RRSP contributions to see how much more you’d get back.
Make sure that you have created a MyAccount with Revenue Canada. It will allow you to see your refund status, etc. at a glance.
Understanding Your Taxes: Learning as You Go
One of the best things about using tax software is how much you learn about your own taxes. No, really! It’s a bit like a crash course in personal finance every spring. As you add your income, deductions, and credits, you get to see how each item affects your refund or taxes owing in real-time. It’s like watching your financial picture come to life.
How to Run the Numbers and Experiment with Tax Savings
This is where it gets interesting. With tax software, you can play with different “what if” scenarios to see how they affect your taxes. Here’s how it works:
1. Boost Your Refund with RRSP Contributions
RRSP contributions are one of the best ways to save on taxes, especially if you’re in a higher tax bracket. If you’re curious about how much you could save, try increasing your RRSP contributions in the software. Watch how your refund grows as you add more—like magic!
Not sure whether to use the RRSP or TFSA? RRSP vs TFSA: Which Is Right for You
2. Explore Charitable Donations
Got a favourite charity? Donations don’t just make you feel good—they can also help your bottom line. Add a few of your charitable donations and see how they impact your taxes. It’s a great way to be generous and save money at the same time.
3. Test Out Medical Expenses and Moving Deductions
Ever wonder if it’s worth adding in medical expenses or moving costs? Try it out! Input these deductions and run the numbers. You’ll quickly see whether these deductions make a difference to your refund.
Understanding Canadian Tax Credits and How They Affect Your Return
Living in Canada means there are a few unique credits available that can help lower your tax bill. Not all of them will make a big dent in your taxes, but some are worth looking into. Here’s a rundown:
-
Northern Residents Deduction:
If you live in northern or remote communities, you may qualify for this credit, though its effect varies depending on your income.
-
Climate Action Incentive:
This one applies if you live in a province that uses the federal fuel charge. It’s designed to help offset energy costs and can give you a nice little tax break.
-
Ontario Trillium Benefit:
For Ontarians, this benefit provides a break based on income and family size.
-
A Truckload More:
Depending on your circumstances, you could be eligible for a home office credit, mileage allowance, alimony credit, child care credit, Medical Expenses, and others specific to your province or territory.
Making Tax Season Work for You
Using tax software and experimenting with different scenarios gives you a window into how taxes work—and how to make them work for you. Since we all have to do our taxes every year anyway, why not use the time to learn and save? Note: You are entitled to use all the deductions legally attributable to you to help reduce your taxes. Don’t however, cross over to the dark side and use questionable, or outright illegal deductions.
Benefits of Filing Multiple Returns
Most tax software packages allow you to file multiple returns at no extra cost. If you’re helping out family members, like your spouse or a parent, this can save you money. Plus, it gives you more practice “running the numbers” and finding savings for your loved ones.
Don’t Forget the Little Things
One of the most satisfying parts of using tax software is catching the little things you might have missed otherwise. For example, professional dues, certain medical expenses, and even moving expenses can sometimes be claimed. If you’re not sure if something counts, enter it and see the impact.
Turning Taxes into a Learning Tool
Believe it or not, taxes can be a valuable learning tool. Each time you file, you learn a bit more about how the tax system works and what strategies help reduce your taxable income. This knowledge isn’t just useful for tax season—it can help you make smarter financial decisions all year long.
The Bottom Line: Turn Tax Season into an Opportunity
Filing your taxes doesn’t have to feel like a burden. With the right software, you can turn it into an opportunity to learn, save, and even strategize for next year. And who knows? You might even find yourself looking forward to next tax season!
So, this year, take the plunge. Run the numbers, explore deductions, and use tax season as a chance to learn about your finances. With a little curiosity and the right tools, you’ll be ready to tackle taxes with confidence—and maybe even a smile.
In my E-books (“Water Barrel” and “The Balance”) I discuss simple methods to live sensibly for today, take charge of your financial affairs, and invest safely for the long term. For more information please visit David Penna Amazon.
Disclaimer for ManageYourMoney.ca
The information provided on ManageYourMoney.ca is intended for educational and informational purposes only. It should not be taken as financial advice. The opinions shared are those of the authors and are meant to encourage sensible financial habits and decision-making. We recommend that you do your own research or consult a certified financial advisor before making any financial or investment decisions. All investments come with risks, and there is no guarantee of success. Past performance is not a reliable indicator of future results. Always consider your personal financial situation and risk tolerance before pursuing any investment opportunities.
As always, we are not qualified financial advisors. We just relate financial management to our own experience which may not resemble yours at all. Advice is frequently worth exactly what you paid for it. Most of ours came from expensive experiences. Neither Jim nor David provide advice on any specific investments.
Please share your thoughts in the comment section below.