If I got a dollar for how many times I got asked this, haha. Here are some deductions and credits you are allowed to claim in the 2020 tax year that could help your reduce your tax bill and maybe get you a refund. Also some things for you to keep in mind as you go through the 2021 tax year!
Deductions: The CRA permits you to make the following deductions to reduce your net income for tax purposes.
- Moving expenses: If you moved for employment or school, you are allowed to deduct moving expenses such as the cost of your movers, temporary housing expenses (up to 15 days), meals, storage, costs of cancelling your lease, the cost of selling and buying a new home and some other related expenses regarding your move.
- RRSP deduction: If you contributed to your RRSPs before March 1, 2021 for the 2020 year, you are allowed to deduct your contributions from your income for tax purposes.
- Home office expenses: Normally, you are allowed to claim costs associated with having a home office such as office supplies, a portion of your electricity, internet and rent. However, in light of the Covid 19 pandemic, the CRA has two ways you could claim these expenses. You could either claim $2 for each day you worked at home, up to $400 or you could detail all the expenses you paid, get your employer to fill out a T2200S/ T2200 Form and be able to show supporting documents for the amounts you are claiming.
- Child care expenses: If you had to pay someone else to take care of your child (under 16, who earned $13,229 or less) so you could go to school, work, carry on research or business, you are allowed to deduct this cost from your net income for tax purposes.
- Carrying charges: If you paid for services to manage your investments other than your RRSPs, TFSAs, RRIP or pooled pension plans, you can deduct this on your tax return.
- Accounting and legal fees: If your legal fees are in regards to support payments you have to make for either spousal or child support you are allowed to deduct this. Accounting fees to have someone complete your return is only allowed to be deducted on your personal income if you have income from business or property and the business hasn’t already claimed these expenses.
- Interest on money borrowed for investment purposes: You can claim the interest you paid on money borrowed to get investment income, dividends or interest. If the only earnings made are capital gains, you cannot claim the interest paid.
Credits you can claim
Credits are applied against your tax bill to reduce the amount of tax you would have to pay. Most of these credits are non refundable which means you can only apply it up to the amount of taxes you are owing. If you have more tax credits than taxes payable, you can’t get the surplus tax credit back. It is important to know which ones can be carried over or transferred to a spouse. Some credits that may apply to you could be:
- Tuition credits: If you went to school (an eligible educational institution or certain bodies), you are able to get a credit for the tuition you would have paid. You are able to carry this forward or transfer up to $5,000 to a parent or spouse. All you need to do is get your T2202 Form or any other forms if you schooled outside of Canada and include the amounts on your tax return. Note: You are able to claim this credit and carry it forward even if you did not work during the year. However, you have to claim the carried forward amount the first year you pay income taxes.
- Canada training credit: If you were at least 26 years old at the end of 2020 and paid fees to an eligible educational institution or certain bodies for courses or certificates or higher education, you can either claim half of your fees or your 2020 Canada training credit limit; whichever is less.
- Climate Action Incentive: If you lived in a small or rural area in any of the following provinces Alberta, Ontario, Saskatchewan or Manitoba and are 18 or over, you may be able to claim this credit on your tax return.
- Disability tax credit: If you have a disability, you are able to get a tax credit of up to $8567 for the 2020 tax year. If you had not claimed this credit in the past, you are allowed to make adjustments on your returns for up to 10 years.
- Digital news subscriptions: If you paid for a digital news subscriptions from a qualified Canadian journalism organization such as the globe and mail, you can claim this credit.
- Charitable organizations: If you made a donation to a registered charity in 2020, you are allowed to claim a portion of this donation, (use this calculator). You are allowed to carry this over for up to five years.
- Medical expenses: You are allowed to claim medical expenses for a 12 month period ending in 2020. If your medical expenses are not up to 3% of your net income or at least $2,397, this might not be beneficial to you. If you are married or have a common law partner, it makes more sense to allow the lower income earner to claim the medical expenses. Here is a list of thing you can claim as medical expenses. PS: If you have high medical expenses and a low income, there is a supplement available for you.
- Home buyer’s amount: You can claim $5000 if you and your spouse acquired a qualifying home and neither of you have lived in a home you owned, that is, you are a first time home buyer. Qualifying homes include single family houses, apartments, condos, townhouses, semi detached houses and mobile homes.
- Interest paid on student loans: You might be allowed to claim the interest paid on student loans in 2020 or the preceding five years if you received it under any of the following acts Canada Student Loans Act, Canada Student Financial Assistance Act, Apprentice Loans Act or similar government and provincial acts (the loan must mainly be government based). You are allowed to carry over the interest paid for 5 years. If you have no tax payable, it makes more sense to carry forward this deduction to another year.
I hope you enjoyed this post and picked up a few things you can include on your income tax return that could help you reduce your tax bill this year. Remember to keep all your receipts for the next 7 years and speak to an accountant if you need help.