BY: ZOE MELNYK
It’s not a scam. That’s right, you won’t go to jail for this. But with the right criteria, you can get the government to fund your trip across the world.
Before the comments start pouring in with how unrealistic this is and how it can’t possibly work, I urge you to read the entire article with an open mind. It’s something different and it doesn’t necessarily apply to everyone in the world. It’s simply a different way to fund your travels.
Surprisingly enough, the government isn’t funding broke college students to travel the world. Not knowingly anyways, what you do with your student loans is your business.
However, if you’re amongst the 68.5 per cent of people unhappy with their current job, this could be your ticket out of the cubicle life and onto a tranquil beach in Sri Lanka.
So that’s the first prerequisite. You need a job, a well paying job. I don’t mean you need a mansion on the ocean, but if you’re still relying on ramen noodles for dinner every night, this might not work.
Next condition is that you hate that job, which apparently most people do. This isn’t exactly necessary, but you need to be prepared to leave.
The third criteria, and possibly the most important, is that you live in a country that offers increasing marginal tax rates, which I will explain in a moment. If you’re not sure, take a second to look it up. This is crucial to the plan.
Last, you’ll need a credit card or savings that will last at least five months.
The Grand Plan
I wish I could take credit for this genius loophole, but I know about as much about taxes as I do about aerospace engineering. We can thank Globetrooper for this one.
Here’s how it works. If you live in a country with increasing marginal tax rates, you pay taxes with every paycheque based on how much you’re estimated to make in a fiscal year.
So, let’s just say for this example you’re single and make $70,000 a year. The average tax rate you’re paying is 25%, which means that every year, you pay $17,500 annually.
Now, if you make more than you anticipated, you actually owe the taxman money. If you made less, the taxman owes you.
Here’s where the plan comes into play.
Say you’ve been working at your job for roughly seven months into the fiscal year and you decide that it’s time for a change. You can’t possibly wait another moment and decide to take off on an adventure.
At this point, you’ve made $40,833 and paid about $10,200 in taxes. If that ends up being your total income for that year, you really should’ve only paid 15% of your income, or $6,125.
So, since you’ve made less than you estimated for that year, you get a return of $4,075, which makes for a substantial vacation.
There is, of course, one stipulation. This is where the credit card or savings is used. You still receive the tax refunds, but you won’t receive the benefits for another five months at the end of the fiscal year.
Now running up your credit cards may be slightly terrifying, as long as you stay on budget, all debts will be paid off in just a matter of months.
As much as you want to quit your job all year round, peak season for this plan to work is 5 to 7 months into the fiscal year.
If you leave too early, you won’t have enough refunds and you’ll have to support yourself without income significantly longer.
If you leave too late, you won’t have an opportunity for a very large refund.
As for paying off your credit cards, let me remind you that traveling really doesn’t need to break your bank. There are flights to Europe for less than $200. There are ways to find cheap accommodation, and even free accommodation.
It is possible to pay off the minimum payments with very little savings while you wait for the tax refund. This means instead of putting $100 aside a week for all seven months or even a full year, you can take a micro-vacation or splurge on your next shopping trip and put aside $10 a week instead.
And if you have a car, sell it. If you have an apartment, sublet it. The less responsibilities you have, the easier it is to go.
Why not just save up?
Now you might be thinking, if you make so much money, why not just save up?
You could do that, put aside a large sum of money each month, there’s nothing wrong with that. However, this idea allows you to continue living with all the same benefits and luxuries up until you decide to leave.
You don’t have to worry about splitting up your paycheque, you don’t have to sacrifice your current lifestyle, the saving is already done.