For you to maximize your tax return, you need to calculate your taxable income first and then lower it using as many tax deductions and credits as possible. Deductions reduce your taxable income, while a credit minimizes the amount of tax you owe.
Canada Emergency Response Benefit (CERB) Fact
The Canada Emergency Response Benefit (CERB) and the Canada Emergency Student Benefit (CESB) are considered taxable income and the government did not withhold any taxes at source. If you received either of these benefits, you have to report 100% of those payments as income in your 2020 tax return. The CRA will send you a T4A tax reporting slip for 2020 showing the total amount to report.
Tax return deadline for 2020
You need to file your taxes by April 30, 2021. The deadline is extended to June 15, 2021 if you're self-employed or have a spouse or common-law partner who is self-employed. All taxes owed must be paid to the CRA by April 30, 2021.
Tax deductions and credits you can use
There are hundreds of credits and deductions you can take advantage of.
Let’s look at 20 of the most common ones so you can increase your chances of getting a bigger refund.
You can claim up to $8,000 in childcare expenses for kids under age 7 and up to $5,000 for children aged 7 to 16. Childcare expenses include daycare centers, summer camps, overnight boarding schools, and caregivers such as nannies. Generally, childcare expenses must be deducted by the spouse with the lower income.
Deduct spousal and child support payments
Support payments sent to a former spouse and/or children can have a noticeable impact on your tax bill.
Deduct student loan interest
If you or your child is studying at a post-secondary institution, you can deduct the interest charged on a student loan. Apply this deduction if you owe taxes, otherwise, it’s better to carry it forward. Interest can be carried forward and applied to any tax return for the next five years.
Maximizing your RRSP contribution
Your RRSP contribution limit is 18% of your earned income from the last tax year, plus any unused amounts from previous years. Check out your latest notice of assessment or log into your CRA My Account to find out what your RRSP contribution limit is.
It’s a good idea to maximize your RRSP contribution in any way you can, including borrowing (if it’s right for you), as you can enjoy sizeable financial benefits. You can even choose to transfer TFSA interest gains, which are tax-free, to bump up your RRSP contribution.
Deduct property taxes (owners) or rental payments (tenants)
Landlords can use Form T776 to claim property taxes for the period in which a rental property was available for rent. Employed and self-employed tenants can claim partial rent payments as a home office expense if they use their home for employment or business purposes.
Deduct professional and/or union dues
Most professional association fees and union fees are tax-deductible, therefore lowering your taxable income.
Deduct employment expenses
You can deduct work expenses such as cell phone bills and office supplies if your employer asked you to purchase them. Educators can also claim up to $1,000 of eligible teaching supplies.
Deduct education/tuition expenses
Post-secondary tuition fees can be deducted by either the student or transferred to a qualifying relative.
Deduct moving expenses
If you moved at least 40 kilometers closer to your work, a new business, or for post-secondary schooling, you can claim expenses from that move. Qualifying expenses include storage costs, travel expenses, temporary living expenses, the cost of cancelling a lease, and more.
Deduct medical and charitable expenses
You may receive a partial deduction for charitable donations and certain medical expenses, including any medical cannabis products you purchased as a patient. Spouses should consider pooling contributions on one spouse’s tax return for maximum benefit.
Get the Home Buyers’ Amount
You can claim a $5,000 tax credit if you purchased your first home and did not live in another home owned by you or your partner in the past four years.
Apply for the GST/HST New Housing Rebate
You may qualify for the GST/HST New Housing Rebate if you did substantial renovations or purchased or built a new home. A similar provision exists for landlords under certain conditions.
Apply for provincial and territorial credits
In addition to federal and provincial GST/HST credits, many provinces and territories have additional credits for certain segments of the population. These include safety-related home renovations for seniors in New Brunswick to climate action incentives in British Columbia. Check out your province’s website to see what credits you may be entitled to.
Reduce taxes from capital gains
Invest using your TFSA and RRSP as all interest earned in these accounts are tax-free. While this won’t create a tax deduction, it is a tax-free place to earn extra income. As mentioned above, RRSP contributions also help boost your tax return.
Write off capital losses
If one of your investments goes sour and you sell it at a loss, you may be able to apply it against your taxable capital gains. If you don’t have enough capital gains to cover the loss, you can claim the leftover amount as a net capital loss. Net capital losses can be used to lower capital gains in any of the three preceding tax years or carried forward to future tax years.
Keep in mind you can't deduct capital losses in tax-free accounts like RRSPs and TFSAs. Learn more about capital losses on the CRA website.
Deduct self-employed business expenses
Small business owners can deduct various business expenses, including advertising costs, bank fees, office supplies, and travel expenses. Those who work from home can claim a portion of their utilities, insurance, and maintenance costs. Deductible amounts are based on what portion of the residence is used for business purposes.
Apply for the disability tax credit
The disability tax credit (DTC) helps disabled individuals and family members reduce the amount of income tax they pay. To qualify for the DTC, a medical practitioner must certify you’re living with a severe mental or physical disability. Payment amounts vary by province, but if you qualify for this tax credit, it could open the door to other benefits.
Deduct home office expenses with the new temporary flat rate method
Did you work at home during the pandemic? If so, the CRA has implemented a new temporary flat rate method that makes it easier to claim deductions for home office expenses. You can claim $2 for each day you worked from home, up to a maximum of $400 (200 working days). There is also no need to calculate the size of your workspace, keep supporting documents, or submit Form T2200.
Claim the Canada Workers Benefit
If you’re a low-income worker, you can claim the Canada Workers Benefit (CWB) when you file your taxes. The refundable tax credit provides up to $1,381 for single individuals and $2,379 for families. It also includes a disability supplement if you have an approved Disability Tax Credit Certificate (Form T2201) on file with the CRA. If you qualify, you can request an advance payment, which allows you to receive half of your benefit in four separate payments.
Canada Training Credit
The Canada Training Credit supports workers over age 26 by reducing barriers to professional development. It offers $250 every year ($5,000 lifetime limit) for eligible tuition and other course fees.
Thanks and enjoy the resurrection season.