News

What you need to know this tax season

Mar 31 2021

Although the tax deadline was extended last season, this year we’re back to the Friday, April 30 deadline. If you’re self-employed or have a spouse or common-law partner who is, you have until Tuesday, June 15 to file (though taxes owing must still be paid by April 30).

In order to answer some of the most common questions about the 2020 tax season, we’ve rounded up some information on things that have changed from previous years. See our list of sources at the end for further reading.

CERB, CRB, CRSB, CRCB

  • Canada Emergency Response Benefit (CERB) provides temporary income support of $500 per week for up to 28 weeks for eligible workers impacted by COVID-19.
  • This income is taxable and no reductions are taken at the source. That means those who received the benefit will be taxed on the full amount. It’s important to set a portion of this money aside based on your tax bracket.
  • That said, the money received through CERB is taxed the same as your regular income, so if you made under $12,000 in total income for the year including your CERB benefit, you won’t have to worry.
  • Although also taxable income, unlike with CERB, the Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB) and Canada Recovery Caregiving Benefit (CRCB) have all been taxed 10% at the source.
  • For the CRB only, individuals will have to repay 50 cents of the benefit for every dollar in net income they earned above $38,000. Work-From-Home Deduction
  • With many Canadians working from home, we now have a simplified way to claim home office expenses. If you’ve been at home more than 50% of the time for over four consecutive weeks in 2020 due to COVID-19, you’ll likely be eligible to claim some home office costs without providing receipts or asking your employer to fill out paperwork.
  • The work-from-home deduction allows you to claim a deduction of $2 for every day you worked from home in 2020, up to a maximum of $400.
  • The deduction lowers the income on which you’ll be taxed. For example, if you qualified for the maximum $400 tax break, that’s not $400 off the taxes you must pay, it’s $400 off your net income. So, if you made $20,400, for example, you’ll now be taxed on $20,000.
  • If you’re an employee with more significant home office expenses, you may be better off using the previous “detailed method” of calculating the deduction.
  • Check the CRA’s calculator to help you assess your work-from-home deduction. The Digital Subscriptions Tax Credit
  • You can now claim up to $500 annually for a subscription to a qualifying journalism organization, translating to a maximum of $75 off your tax balance!
  • Broadcasting organizations are not eligible for this credit. Rates and Limits Some tax rates and limits have changed for 2021:
  • Income tax brackets have increased to keep pace with inflation.
  • The Canada Child Benefit has also been adjusted with inflation. In 2021, the maximum a parent can receive is $6,765 for children under age 6 (up from $6,639 in 2020) and $5,708 for children ages 6 to 17 (up from $5,602 in 2020).
  • EI premiums are staying steady, but maximum insurable earnings have increased from $54,200 to $56,300
  • Maximum pensionable earnings have increased to $61,600. Employee and employer contribution rates for 2021 have also increased by 5.45%, up from 5.25% in 2020. TFSA Contribution limit increased
  • The annual contribution limit for Tax-Free Saving Account (TFSA) has increased by $6,000.
  • If you’ve never contributed to a TFSA, and have been eligible since 2009, you’d now have $75,000 in total contribution room. Basic Personal Amount
  • The non-refundable tax credit all taxpayers are eligible to claim, the basic personal amount is the amount you can earn without paying any income tax (with some exceptions). This amount is set to continue increasing with inflation.
  • For 2020, the basic personal amount was $13,229.

Tax Breaks for Seniors

  • Old Age Security (OAS) has been increased by 10% for seniors older than 75 years of age earning less than $77,580. The change meant an increase of $729 annually in OAS starting in July 2020.
  • The Canada Pension Plan survivor benefit has been enhanced, with the maximum pensionable earnings increased to $58,700, up from $57,400.
  • Additionally, a surviving spouse, over the age of 65 and not otherwise receiving CPP benefits, is able to get 60% of their deceased spouse’s pension. This means an increase of $2,080 annually. Survivors between 60-64 years of age are eligible for 37.5%. Tax Breaks for Parents
  • Beginning in 2020, all maternity or parental benefits received through EI will be tax-exempt at source resulting in an extra $1,800 a year for someone who usually earns $45,000 a year.
  • The Canada Child Benefit will increase for new parents with kids under one year old. The 15% boost will mean an increase of as much as $1,000 for some parents. In July 2020, the base benefit is expected to be $7,750.
  • The Child Disability Benefit has almost doubled, with the potential for more than $2,800 extra per year. Claiming Cannabis as a Medical Expense
  • With cannabis now legal in Canada, you can claim a medical expense tax deduction for any cannabis products purchased as a patient after October 16, 2018.

Sources

  • Greedy Rates https://www.greedyrates.ca/blog/tax-changes-canadians-need-to-know- about/
  • Global News https://globalnews.ca/news/7616996/2021-taxes-canada/
  • CPA Canada https://www.cpacanada.ca/en/business-and-accounting- resources/taxation/blog/2021/january/income-tax-impacts-covid-19-support-programs
All Posts