Tax deductions and credits to use now

And key personal changes in the federal budget

The April 30 tax filing deadline is just a few days away. But you still have time to ensure you get every tax break coming to you before you have to file. In addition, the April 19 federal budget made some proposals affecting personal taxes and government benefits. And while these have not yet passed into law, keep an eye out for them for 2021 tax planning.

Tax credits and deductions

Here are a few tax credits and deductions that may be of particular interest for 2020 personal tax filing:

Employment expenses. You can deduct certain expenses (including any GST/HST) you paid to earn employment income, but only if you were required to pay expenses under the terms of your contract, did not receive an allowance for them, or if an allowance was included in your income. (See my recent post for more details on claiming home office expenses during the Covid lockdowns.) In addition, you can deduct any legal fees paid to collect salary or wages.

Medical expense deductions. You may claim only eligible medical expenses if you or your spouse or common-law partner paid for the medical expenses in any 12-month period ending in 2020 and did not claim them in 2019. Generally, you can claim all amounts paid, even if they were not paid in Canada. You can find a list of common medical expenses at the CRA website.

Home Buyers’ Tax Credit. You can claim up to $5,000 on the purchase of a qualifying home in 2020 if you or your spouse or common-law partner acquired a qualifying home and you did not live in another home owned by you or your spouse or common-law partner in the year you bought the home or in any of the four preceding years (first-time home buyer). The maximum tax savings generated by the non-refundable tax credit will be up to $750 (that is, $5,000 x 15%).

Canada Caregiver Credit. You may be able to claim as much as $7,276 for your spouse or adult dependants. The amount you can claim depends a variety of factors, including your relationship with the person, your circumstances, the person’s net income, and whether other credits are being claimed for that person. Check with your tax advisor if you are eligible for this credit, or visit the federal government website for more details.

Investment management. Fees you paid to professional investment managers to manage and administer your investments are deductible. But administration fees paid for your Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) or Tax-Free Savings Account are not. You also cannot deduct mutual fund or ETF management fees or brokerage fees or commissions paid to buy and sell securities. Instead, you may be able to use these costs when you calculate your capital gain or capital loss. Investors who pay fees directly for separately managed accounts (SMAs) or wrap accounts may deduct those fees as carrying charges on their tax return.

Key personal federal budget proposals

As for the federal budget, here are some key proposals to watch for if they are passed into law this year.

Covid benefit repayment deduction. Normally, recipients who repaid government Covid benefits, such as Canada Emergency Response Benefit (CERB), Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), Employment Insurance Emergency Response Benefit, Canada Emergency Student Benefit (CESB), and Canada Recovery Caregiving Benefit (CRCB), would claim a deduction in the year of repayment. The budget proposes to give individuals the option of claiming the deduction in either the year of receipt or year of repayment for benefits repaid before 2023.

Covid benefits extended. The federal budget proposes to extend a number of Covid-related benefits.

Canada Recovery Benefit (CRB) is proposed to be extended for 12 weeks, for a maximum benefit period of 50 weeks. Additionally, the budget proposes that for the first four weeks of the extended period, the weekly benefit will be $500, and will decrease to $300 weekly for the next eight weeks. New claimants after July 17, 2021 will also receive $300 per week. This extension is slated to end on Sept. 25, 2021.
Employment Insurance Sickness Benefits are proposed to be extended to a maximum 26 weeks from the current 15 weeks.
Canada Recovery Caregiver Benefit, at $500 per week, gets a four-week extension to a maximum 42 weeks.

OAS payment boost. For Old Age Security recipients over age 75 as of June 2022, the budget proposes a one-time payment of $500 in August 2021. In addition, starting in July 2022, OAS payments will be increased by 10% for those who are over age 75.

Robyn Thompson, CFP, CIM, FCSI, is the founder of Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management for high net worth individuals and families. Contact her directly by phone at 416-828-7159, or by email at rthompson@castlemarkwealth.com for a confidential planning consultation.

Notes and Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned are illustrative only and carry risk of loss. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please contact the author to discuss your particular circumstances.