In addition to the changes related to COVID-19, other significant changes will take effect that have implications to your 2020 personal tax return.
Tax filing deadline
While the deadline to file your 2019 personal tax return and pay any outstanding balance was extended in 2020, the tax filing deadline for your 2020 tax return remains April 30, 2021. Self-employed individuals and their spouses or common-law partners must file their tax returns by June 15, 2021, but any amount due must still be paid by April 30 to avoid interest charges.
On February 9, 2021, the federal government announced – that individuals with total taxable income of $75,000 or less in 2020 who received COVID‑19-related income support or employment insurance benefits in that year, will not be required to pay interest on any outstanding income tax debt for the 2020 tax year until April 30, 2022. The deadline for filing their tax returns remains unchanged.
Enhanced basic personal amount
The basic personal amount (federal amount), which was $12,069 for all taxpayers in 2019, will increase in 2020, and the amount will now depend on your net income:
- If your net income was greater than or equal to $214,368, the level at which the top 33% marginal tax bracket starts, you will be able to claim a basic personal amount of $12,298.
- If your net income was lower than or equal to $150,473, the level at which the 29% tax bracket starts, you will be able to claim an enhanced basic personal amount of $13,229.
- If your net income was between these two amounts, you will have a pro-rated basic personal amount.
This new enhanced system will also apply to the maximum spousal or common-law partner amounts and the maximum amount for an eligible dependant. The graduated tax brackets and other non-refundable credit amounts (e.g., the age amount and the disability amount) increased by an inflation factor of 1.9% for 2020.
New digital news subscription tax credit
There is a new, non-refundable digital news subscription tax credit that will be available from 2020 to 2024. This tax credit is calculated at 15% of the eligible amounts paid, to a maximum of $500, to access primarily original written news in a digital format from a qualified Canadian journalism organization (QCJO).
If your subscription provides access to content in a non-digital format, or to content not from a QCJO, only the cost of a stand-alone digital subscription to the content of the QCJO is eligible for the credit; if there is no stand-alone digital subscription, one half of the amount paid is considered an eligible expense.
New Canada Training Credit (CTC)
The CTC is a new refundable tax credit introduced in 2020. If you are between 26 and 65 years old, you will accumulate $250 towards their Canada Training Credit Limit (CTCL) account in 2020 if both of the following apply to you:
- You had at least $10,000 of “working income” in 2019.
- Your total 2019 net income was less than or equal to $147,667 (the level at which the 29% tax bracket started that year).
Working income generally includes employment and self-employment income, research grants, scholarships, bursaries, prizes, and maternity and parental EI benefits.
Who qualifies, and how to calculate your CTC balance
If you meet both the minimum working income limit and the maximum total income limit in subsequent years, the CTCL account will continue to accumulate over time to a maximum of $5,000; both limits will be indexed to inflation.
You can claim up to 50% of the costs of taking a course or enrolling in a training program against the balance in your account in the year you paid the tuition. The remaining 50% of the program costs may be eligible for the tuition tax credit, as the CTC uses the same eligibility criteria as are used for the tuition tax credit. You would see the balance in your CTC account for 2020 on your notice of assessment for 2019. Any unused CTCL will expire when you turn 65.
For example, Sohil was a 28-year-old Canadian resident in 2020. From 2019 to 2023, he met both the minimum working income limit and the maximum net income limit, so the balance in his notional CTCL account as reported on his 2023 notice of assessment was $1,250 (five years $250 per year). In 2024, he enrols in a continuing education program at a local community college to upgrade his skills. The tuition he pays for the program is $2,000.
On his 2024 tax return, Sohil can claim a refundable CTC of $1,000 (50% of the $2,000 tuition), and he can claim a non-refundable tuition tax credit of 15% on the remaining $1,000 of tuition fees not eligible for the CTC. Sohil’s CTCL for 2025, assuming he meets both the working income and net income criteria for 2024, would be $500 ($1,250 opening balance – $1,000 CTC claimed in 2025 + $250 added based on his income in 2024).
Tax-exempt qualified donees
Certain not-for-profit journalism organizations were allowed to register with the CRA under a new category of tax-exempt qualified donee. Canadians may claim the charitable donation tax credit for donations to these organizations.
Other changes for 2021
Tax brackets and non-refundable tax credits
The federal tax brackets and most non-refundable credit amounts will increase by 1.0% for 2021. The enhanced amounts for the basic personal amount and the maximum amounts for spouses and eligible dependants will be $13,808, in order to achieve the government’s target of $15,000 for 2023.
Employment Insurance and Canada Pension Plan
Employment Insurance premiums remain unchanged for 2021, but the maximum insurable earnings have increased from $54,600 in 2020 to $56,300.
The maximum pensionable earnings for the Canada Pension Plan have increased from $58,700 in 2020 to $61,600; the employee and employer contribution rates have also increased from 5.25% to 5.45% in 2021.
The contribution limit for Tax Free Savings Accounts remains unchanged at $6,000 for 2021.
Treatment of certain stock options
The 2019 federal budget proposed changes to the preferential tax treatment of stock options for employees of large, long-established, mature companies. As a result of a continuing consultation process, the federal government announced in December 2019 that the implementation of these changes would be delayed. The Fall Economic Statement released on November 30, 2020 further clarified the changes and noted that they will apply to stock options granted after June 2021.
To see how these changes affect you, it may be useful to meet with your Chartered Professional Accountant (CPA).
Dami Okunade CPA, CA, CFA