Here are 5 income tax items for 2020 that you should know about when filing your personal income tax return.
1. 2020 filing deadline
Despite this being a more complex tax season due to Covid-19, the Canada Revenue Agency (CRA) has not extended the tax filing deadline. The due date is still April 30 for most Canadians, and June 15 for self-employed people.
Those who had a total taxable income of $75,000 or less and received one or more of the COVID-19 benefits listed below will have a full year after the filing deadline of April 30, 2021 to pay any tax debt without facing interest charges. However, those who qualify for the payment deferral still need to file on time if they owe taxes — or they'll face a late-filing penalty.
Eligible benefits include: Canada emergency response benefit (CERB). Canada emergency student benefit (CESB). Canada recovery benefit (CRB). Canada recovery caregiving benefit (CRCB). Canada recovery sickness benefit (CRSB). Employment Insurance benefits. Similar provincial emergency benefits.
2. Taxes on government benefits
The benefits listed above are considered taxable income, so the federal government introduced the tax-payment deferral to help out the many Canadians who will have to pay taxes on their benefit payments.
The government did not withhold any taxes on CERB, and CESB benefit payments Canadians received in 2020.
It did withhold a 10 per cent tax for people who received CRB, CRCB and CRSB benefits, but tax expert Jamie Golombek, Managing Director of Tax and Estate Planning, CIBC said many of those individuals will still owe the government money, as most Canadians' income is taxed at a much higher rate than 10 per cent.
3. Work from home deductions
Due to the pandemic, many Canadian employees worked from home for part of 2020, which means they may be eligible for a home office expense tax deduction. To qualify, you must have worked from home more than 50 per cent of the time for at least four consecutive weeks last year. There are two options for Canadians claiming home office expenses:
Detailed Method This involves calculating what percentage of your household costs — such as electricity, rent and internet — can be applied to your home office space. You are also required to save all relevant receipts. Employer must complete and sign Form T2200S Declaration.
Flat Rate Method New in 2020, the CRA has introduced a new, temporary flat rate method. It allows employees to claim a tax deduction of $2 for each day they worked from home, up to a maximum of $400. If the employee uses this method, their employer is not required to complete Form T2200S, Declaration of Conditions of Employment for Working at Home Due to COVID-19, and the employee is not required to keep documents to support their claim.
If you are a homeowner, it generally makes more sense to use the flat rate method because employees cannot claim mortgage payments – usually a homeowner’s biggest expense.
4. Digital tax credit
Canadians can claim up to $500 for subscriptions to qualifying Canadian media, such as newspapers, magazines, websites and podcasts, that don't have a broadcast license and offer primarily original news content.
5. Capital Cost Allowance – New Class 56
For self-employed taxpayers: The new CCA class 56 has been added for properties acquired after March 1, 2020, and available for use before 2028, that are zero-emission automotive equipment and vehicles that currently do not benefit from the accelerated rate provided by classes 54 and 55. Like these two CCA classes, class 56 benefits from a temporary enhanced first-year CCA rate of 100% for eligible property available for use before 2023.
Modifications have been made to correctly calculate the class 56 CCA in Area A of all self-employment income statements.
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