Tax time is upon us, and the Freedom Accounting team is hard at work behind the scenes getting ready. Every year at this time, we send a Tax Preparation Letter to our clients, and help them gather all the receipts, slips and documents they need (let us know if you’re interested in receiving a copy). We’re also on top of the latest deductions and tax changes.
Here’s what you need to be aware of this year:
Basic Personal Amount for 2021
Every Canadian taxpayer can claim the basic personal amount, which adjusts higher in line with inflation. For the 2021 tax year, it’s $13,808 versus the previous year’s $13,229.
Click here to see the Federal Income Tax Table for 2021.
And here to see the Income Tax Table for British Columbia.
Students who would have been eligible for the Canada Emergency Response Benefit (CERB) instead of Canada Emergency Student Benefit (CESB), will be allowed to offset their CERB repayments by whatever amount they would have received in CESB benefits.
If you received federal, provincial, or territorial government COVID-19 benefit payments, such as the Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), or Canada Recovery Caregiving Benefit (CRCB), you will receive a T4A slip with instructions on how to report these amounts on your return.
The Canada Recovery Benefit (CRB) is clawed back at a rate of 50 cents for every dollar of income over $38,000 to a maximum amount of CRB received.
You also may have qualified for the Canada Worker Lockdown Benefit, which came into effect on Oct. 24. The $300 a week benefit is also accessible to people who couldn’t get Employment Insurance and runs until May 7, 2022.
Any benefits received are considered taxable income and must be reported on your income tax returns.
The Tax-Free Savings Account (TFSA) contribution limit for 2022 is $6,000, remaining the same as 2020 and 2021. If you have never contributed to a TFSA and have been eligible since its introduction in 2009, your cumulative contribution room will be $81,500 in 2022.
The per-km amounts that may be paid tax-free to employees or officers will remain at 59 cents per km for the first 5,000 km and 53 cents per km for each additional km.
Changes to Existing Deductions
The Enhanced Eligible Educator School Supply Tax Credit, which allows teachers and early childhood educators to claim a 15% refundable tax credit on up to $1,000 of eligible supplies, is increasing to 25%. This will apply even if the teachers used those supplies at home rather than in the classroom/daycare.
The Canada workers benefit (CWB) rates and income thresholds have changed for 2021. A new “secondary earner exemption” has also been introduced. Ask us if this applies to you.
The definition of zero-emission vehicle has changed for vehicles acquired after March 1, 2020. The CRA says: “the vehicle may still qualify as a zero-emission vehicle if the vehicle was subject to a prior capital cost allowance (CCA), or terminal loss claim provided that the vehicle was not acquired by the taxpayer on a tax-deferred “rollover” basis or previously owned or acquired by the taxpayer or a non-arm’s length person or partnership.”
The Digital News Subscription Tax Credit is a federal non-refundable credit that applies to fees you paid for a digital news subscription from a qualified Canadian journalism organization. You can claim up to $500 in eligible subscriptions, which could save you up to $75 in taxes (15%).
Working from Home
The government is continuing their easier flat-rate method to claim a deduction for home-office expenses—with the maximum tax deduction increasing to $500 (up from $400 last year).
Also note that if your office closed during the pandemic, and you’ve been working from home but have a regular parking spot provided by your employer, the CRA says “employer-provided parking at the regular place of employment will not be considered a taxable benefit.”
Deductions for students
If you started university or college, went back to school, or took courses or training to upgrade your skills, you could claim the Tuition Tax Credit, which allows a maximum claim of $5,000. If you don’t owe enough tax to make full use of the credit, you can either carry forward the extra amounts to claim in the future, or transfer them to a spouse, parent, or grandparent.
The Canada Training Credit is a refundable credit for up to half your eligible tuition or training fees. You should have enough accumulated in your Canada Training Credit account, which the government contributes to annually to claim it. The program began in 2019 with allocations of $250 per year, so eligible taxpayers who haven’t yet made any claims would have $500 available to claim for 2021.
Did You Know?
The Medical Expenses Tax Credit allows you to claim a whole slew of eligible costs, including prescriptions, private or semi-private hospital care, tests, dental care, health plans (premiums and/or co-pays), travel expenses (when your only option for treatment was at least 40 kilometres away), and many other medical services and devices.
The minimum claim threshold is either 3% of net income or $2,421 for 2021, whichever is less. You can use any 12-month period ending in 2021 but you can’t include any expenses you claimed on last year’s return.
If you moved at least 40 km closer to a new workplace or school, you can claim the Moving Expenses Deduction. This allows you to write off amounts paid for transportation and storage; travel (i.e., gas, vehicle maintenance, meals, accommodation); temporary living expenses (for up to 15 days); real estate commissions and other costs of selling and/or buying a home; utility hookups and disconnections; and fees for cancelling a lease.
The Federal Political Contribution Tax Credit lets you save nearly 50% or more on eligible donations of up to $1,275.
Speaking of donations, you can claim credits for charitable giving. Find out what’s eligible here. In any one year, you may claim donations made by December 31 of the applicable tax year, any unclaimed donations made in the previous five years; and any unclaimed donations made by your spouse or common law partner in the year or in the previous five years. You can claim donations to a limit of 75% of your net income and for gifts of certified cultural property or ecologically sensitive land, you may be able to claim up to 100% of your net income.
If you bought your first home in 2021, you could claim the $5,000 Home Buyers’ Tax Credit.
Those who invest in a non-registered account in 2021 may be able to deduct some investment-related fees from your taxable income, under the Carrying Charges and Interest Expenses deduction. This includes fees for investment advice, such as guidance on buying or selling a specific share or security, as well as fees for managing your non-registered investments.
We can help you claim all the deductions you’re entitled to. Connect with our team to get started.