Now that employees have received their T4s and other tax slips are on the way, it is time to file for your 2020 tax return. This article discusses the new and temporary measures available to taxpayers for 2020 and beyond.
If you are an individual who received one of the following government support benefits for COVID-19, you will receive a T4A or T4E slip. These support payments are taxable and should be declared on your 2020 tax return.
CERB payments have no tax withheld at source, so be prepared to pay taxes. It is also important to note that the Canadian federal government has recently announced that self-employed individuals with net self-employment income less than $5,000 who applied for CERB will not be required to repay their support payments, as long as their gross self-employment income was at least $5,000 and they met all other eligibility criteria. Here are the slips that you will receive:
In August 2020, the federal government announced three new benefits, all of which are taxable benefits with 10% tax to be withheld at source.
In February 2021, the government also announced that it will provide targeted interest relief to Canadians who received pandemic-related income support benefits. Once individuals file their 2020 income tax and benefit return, they will not be required to pay interest on any outstanding income tax debt for the 2020 tax year until April 30, 2022. This will give Canadians more time and flexibility to pay if they have an amount owing.
To qualify for targeted interest relief, individuals must have had a total taxable income of $75,000 or less in 2020 and received income support in 2020 through one or more of the following COVID-19 measures:
Since the pandemic has forced many employees to work from home, many Canadians were wondering if some of their home office expenses are tax deductible. The Canada Revenue Agency states that if you have worked at least 50% of the time from home for a period of at least four consecutive weeks in 2020 due to COVID-19, you may be eligible to claim a home office deduction on your tax return. Eligible employees have the option to choose between two methods to claim a home office deduction for 2020:
Self-employed individuals will continue deducting home office expenses as they did in previous years.
A new refundable tax credit, the Canada Training Credit, became available in 2020. If eligible, an individual can claim the CTC, which is based on the lesser of 50% of eligible tuition and fees paid in respect of 2020, and also serves as their CTC limit for the year. CTC is for an individual who is at least 25 years old and less than 65 years old at the end of a calendar year. They can accumulate $250 of their CTC limit for the next tax year, up to a maximum of $5,000 in a lifetime, provided they satisfy all of the following conditions for the year:
Even in years where you make a claim for the CTC, you can still accumulate $250 in your CTC limit for the next tax year.
Note: Educational institutions outside of Canada are not eligible for Canada Training Credit.
A new 15% non-refundable tax credit for subscriptions to Canadian digital news is available on amounts paid by individuals to a qualified Canadian journalism organization (QCJO) for qualifying subscription expenses for 2020 to 2024. Up to $500 in amounts paid for qualifying subscription expenses in the year will qualify for a maximum tax credit of $75 annually. If the qualifying subscription is eligible and provides access to content in non-digital form or content other than QCJP content, note the following:
The 2019 federal budget extends access to the HBP in order to help Canadians maintain homeownership after the breakdown of a marriage or common-law partnership. In this situation, certain additional HBP eligibility conditions must be met. These new measures take effect for withdrawals made after 2019. Existing HBP rules will otherwise generally apply.
Provided that you live separate and apart from your spouse or common-law partner for a period of at least 90 days as a result of a breakdown in your marriage or common-law partnership, you will be able to make a withdrawal under the HBP if you live separate and apart from your spouse or common-law partner at the time of the withdrawal and began to live separate and apart in the year in which the withdrawal is made, or any time in the four preceding years. However, in the case where your principal place of residence is a home owned and occupied by a new spouse or common- law partner, you will not be able to make an HBP withdrawal under these rules.
You will be required to dispose of the previous principal place of residence no later than two years after the end of the year in which the HBP withdrawal is made. The requirement to dispose of the previous principal place of residence will be waived if you buy out the share of the residence owned by your spouse or common-law partner. The existing rule that individuals may not acquire the home more than 30 days before making the HBP withdrawal will also be waived in this circumstance.
Existing HBP rules will otherwise generally apply. For example, your outstanding HBP balance must be nil at the beginning of the year in which you make an HBP withdrawal.
Keep in mind that the HBP limit increased to $35,000 for withdrawals made after March 19, 2019 and repayments to your RRSP begin in the second taxation year following the year of withdrawal.
The federal basic amount will gradually be increased to $15,000 by 2023. It is comprised of two elements: the base amount ($12,298 for 2020) and an additional amount ($931 for 2020). The additional amount is reduced for individuals with net income in excess of $150,473 and is fully eliminated for individuals with net income in excess of $214,368.
Government of Canada proposes increase to number of weeks for recovery benefits and Employment Insurance regular benefits to ensure continued support for Canadians who have been hardest hit.
On February 19, the federal government announced its intent to introduce regulatory and legislative amendments to increase the number of weeks of benefits available for the Canada Recovery Benefit (CRB), the Canada Recovery Sickness Benefit (CRSB), the Canada Recovery Caregiving Benefit (CRCB) and Employment Insurance (EI) regular benefits.
The proposed changes would result in the following:
To ensure employees in the federally regulated private sector can access the proposed additional weeks of CRCB and CRSB without risk of losing their jobs, the maximum length of the leave related to COVID-19 under the Canada Labour Code would also be extended.
The government also proposes to allow self-employed individuals, who have opted into the EI program, to access special benefits by using a 2020 earnings threshold of $5,000 compared to the previous threshold of $7,555. This change would be retroactive to claims established as of January 3, 2021 and would apply until September 25, 2021.
Remember, this year the tax filing deadline is April 30, 2021 and there has not been any announcement regarding its extension. We strongly suggest that you file your return by this due date.
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