Priceless Tips on How to Save on Your Personal Taxes

2020 has ended, the year that felt like it was a decade long, it's a good idea to think about personal income tax planning now so that you can maximize tax savings in 2020 and be prepared when filing your personal tax and paying your tax due.


Tax Advisor


Contribute to your rrsp


This tip will always be the #1 action you can take to reduce your personal taxes. In order to be deductible for 2020, your registered retirement savings plan (RRSP) contribution must be made on or before March 1, 2021. Check your 2019 Notice of assessment or check your online CRA My account service to check your 2020 RRSP Contribution limit.


Your contribution limit for 2020 is 18% of your 2019 earned income (to a maximum of $27,230) less your 2019 pension adjustment, if any, plus any RRSP room carried forward from prior years.


Pay what you can towards your deductions or credits.


Alimony childcare expenses, investment counsel fees, professional dues, charitable donations, medical expenses, and political contributions are all tax creditable or deductible. To ensure that you will benefit from the tax credit or deductions in 2020, pay what you can by December 31, 2020.


Medical expenses are creditable on amounts in excess of 2,397 or 3% of your net income (whichever is less). If you had a year with high medical expenses that are above the threshold, and you don't anticipate you will in 2021, consider paying some additional medical expenses now to get a higher tax credit. If its 2021 already, its not too late, you can claim still pay additional medical eligible medical expenses now you can claim medical expenses in any 12-month period ending in a given year. Note that medical expenses eligible for the tax credit evolve over time and you should check the CRA website for a list of common medical expenses that qualify for the credit.


Tax Free employer provided benefits


Home office equipment and furniture

The CRA announced that up to $500 in employer reimbursements for the purchase of computer equipment and home office furniture to enable an employee to work from home will not be considered a taxable benefit in 2020.


Parking

Employer-provided parking at an employee's regular workplace will not be considered a taxable benefit where the regular place of employment is closed during the pandemic.


Home internet or cellphone costs

Reasonable employer reimbursed internet and cellphone costs to an employee during the pandemic for employment purposes will not be a taxable benefit.


Use the Canada Training Credit

Starting in 2020, you may be able to claim the new refundable Canada Training Credit (CTC) for eligible tuition and fees paid for courses taken in the year. Eligible Canadian residents will accumulate $250 each year in their notional CTC account, up to a lifetime maximum of $5,000.


The amount of the CTC, which is claimed on your income tax return, is the lesser of 50% of the eligible tuition and fees paid in respect of the year, and your CTC limit for the year.


Set aside funds for tax the COVID-19 support payments


Many Canadians received the Canada Emergency Response Benefit (CERB), it is important to know that the amounts are taxable. Since no income taxes were withheld at the time of payment, depending on whether you have other sources of income for the year, you may want to estimate the taxes that will be due and set aside the funds now, This helps avoid a suprising unexpected tax bill.


If you've received the new Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CESB), and Canada Recovery Caregiving Benefit (CRCB), payments are also taxable. But unlike the CERB and CESB, the federal government withheld 10% the payments before you received it. However, depending on your 2020 marginal tax rates, the amount of taxes withheld may not be enough to cover your tax liability on these payments and you may need to pay additional tax, contact Opengate CPA to check your marginal tax rate.


Consider selling investments that are accruing losses

The stock market is hot right now but not for all types of investments due to the pandemic. If you investments are accruing a loss now, and you have had realized capital gains in one of more of the last three years, you can sell you loss investments now, and carry back the losses to reduce the capital gains in prior years, resulting in a refund of taxes from prior years. Book a free consultation with an OpenGate CPA before you undertake this plan, as there are superficial loss rules that may deny your losses.


Tax planning should be ongoing

Tax planning shouldn't be something that only happens when you file your tax return.

OpenGate CPA offers a free consultation. Book a no-charge, risk-free consultation to talk about your unique situation and learn how OpenGate can help you reduce your personal taxes.