Tax season is underway, and Canadians may be facing some unfamiliar terrain. Job losses, side gigs, and working from home were just some of the by-products of 2020. Those who received emergency government support may find themselves owing taxes for the first time. Along with traditional tax-reduction strategies like contributing to a Registered Retirement Savings Plan (RRSP), there are a few new tax credits and deductions that can help you keep more of your hard-earned money.
Simplified process for home office expenses
With so many Canadians working from home due to the pandemic, the Canada Revenue Agency (CRA) introduced a new temporary flat rate method for claiming home office expenses for 2020. Those who worked from home more than 50% of the time for at least four consecutive weeks can claim $2 for each day, up to a maximum of $400. If you plan to use the original detailed method to claim work from home expenses, your employer must provide a Form T2200S or T2200.
Digital News Subscription Tax Credit
You can claim the cost of a digital subscription to a qualified Canadian journalism organization for the years 2020 through 2024. The non-refundable tax credit is calculated at 15 per cent, up to a maximum of $500 in annual subscriptions, which translates to as much as $75 in savings each year.
Canada Training Credit
This new refundable tax credit can help with costs to upgrade your skills to stay current in today’s job market. Beginning in 2020, workers aged 25 to 65 can claim fees for college, university or other educational institution in Canada providing courses at a post-secondary level, or an eligible institution in Canada that provides occupational-skills courses. Canadians automatically accumulate $250 annually, up to a lifetime maximum of $5,000.
Pandemic emergency funds
Government programs have been a welcome relief for many households, but this income is taxable. The Canada Emergency Response Benefit (CERB) and the Canada Emergency Student Benefit (CESB) rolled out in the first wave of federal pandemic support and no taxes were withheld at source. So, recipients will be taxed on the full amount received. The Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), and Canada Recovery Caregiver Benefit (CRCB) are part of the second wave of federal pandemic support, and the CRA withholds a 10% tax at source.
It’s important to understand if you’re in a position where you may owe taxes and what strategies you can use to help lower your tax bill. If you have questions about the markets or your investments.
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