Canadians: tax changes for 2021

For many Canadians, 2020 was a unique year and they may have many questions about what their taxes would look like in the 2021 tax season.

Filing deadline

The tax-filing deadline for most Canadians (for the 2020 tax year) is on April 30, 2021. For those who are self-employed, or who have a spouse/partner who is self-employed, the deadline extends until June 15, 2021.

In 2020, the CRA had extend the 2019 tax filing deadline and tax owing payment period. It is unclear if similar extensions will be granted during the 2021 tax season. Howver, to avoid unnecessary late filing penalties, we would suggest planning to file your 2020 return and pay outstanding taxes by April 30, 2021.

COVID-19 benefits and taxes

Many Canadians may have received in 2020 from the Canada Emergency Response Benefit (CERB)Canada Emergency Student Benefit (CESB)Canada Recovery Benefit (CRB)Canada Recovery Sickness Benefit (CRSB), or Canada Recovery Caregiving Benefit (CRCB) is considered taxable income on the 2020 T1 return. The CRA or Service Canada will mail a T4A or T4E tax slip by the end of February to the taxpayer for the total amount in benefits the taxpayer had received. If you don’t receive your slip(s) by then, check your My Account for electronic copies.

  • CERB or CESB: no taxes were deducted at source, the taxpayer will owe income taxes on the full amount received, calculated at the marginal tax rate.
  • CRSB or CRCB: 10% tax was withheld at source. Depending on the taxpayer’s total income for 2020, additional taxes might need to be paid.
  • CRB:10% tax was withheld at source. However, for taxpayers with other income totalling more than $38,000 in 2020, they will have to reimburse $0.50 of the CRB for every dollar of net income above $38,000 (not including the CRB itself).

New for 2020 T1

  • Simplified Home-Office Expenses Deduction: Because millions of employed Canadians worked remotely in 2020 due to the COVID-19 pandemic, the government has made it easier to claim a deduction for home-office expenses this year. To qualify, you had to perform more than 50% of your usual work hours from home over a period of at least four consecutive weeks during 2020. If you meet that threshold, you can deduct $2 for every day you worked at home due to the pandemic, up to a maximum of $400, from your taxable income. If you use this new temporary flat rate method to claim the deduction, you don’t need any receipts or other documentation.
  • Canada Training Credit: If you paid for tuition or training in 2020, you may be able to claim this brand-new refundable tax credit. At the end of 2019, eligible workers aged 25 to 65 began automatically accumulating an annual sum of $250, up to a lifetime maximum of $5,000, in a Canada Training Credit account. Starting this year, you can claim the full balance in your Canada Training Credit account, or up to half your eligible tuition/training fees, whichever is less. Unused amounts remain in the account and can be claimed in future years.
  • Education Tax Credits Eliminated, and someTuition Tax Credits: Alberta‘s 2019 Budget eliminates the education and tuition tax credits for 2020 and later taxation years.  Credits earned prior to 2020 can still be claimed.  BC‘s 2018 Budget eliminated the education tax credit for 2019 and later taxation years. Ontario‘s 2016 Budget announced that the ON tuition and education tax credits would be discontinued and the tuition tax credit can be claimed for eligible tuition fees paid up to September 4, 2017.  The Saskatchewan 2017 Budget announced the elimination of the tuition and education tax credits effective July 1, 2017.  The tuition tax credit is still available Federally
  • Basic Personal Amount: the basic personal amount for a tax-free allowance for 2020 is $12,298, up from $12,069 in 2019.
  • CPP contributions: Increases in CPP contribution continue in 2020 with employers and employees making a contribution of 5.25% on up to $58,700 in pensionable earnings. The basic exemption amount for 2020 remains at $3,500. The contribution rate for self-employed will be 10.5% (i.e. 5.25% x 2).
  • Home Buyers’ Plan (HBP): First-time home buyers can withdraw up to $35,000 from their RRSP tax-free and put it towards the purchase of a home under the revamped Home Buyers’ Plan. A couple can withdraw up to $70,000.

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