Goodbye, 2020! It was a strange and challenging year for many of us for several reasons.
This 2020 tax year will be unlike any other, with many individuals collecting CERB without any tax withholdings. However, this income is taxable, which means that individuals receiving CERB will owe tax on the funds they received, which can seriously impact your 2020 tax return. Those who typically expect a refund might owe money for tax in the current year or significantly reduce their refund.
At Creditaid we want to ensure our clients are prepared financially to assure continued success in our program and beyond. We have provided several tax tips below, some of which may apply to the current year. These are beneficial tax tips and suggestions that can benefit you and your family for years to come!
If you have any questions or wish to set up a tax planning session, please give us a call at 204 987 6890.
Working From Home Office Expenses
Employees who worked from home more than 50% of the time over a period of a least four consecutive weeks in 2020 due to COVID-19 will now be eligible to claim the home office expenses deduction for 2020. The use of a shorter qualifying period will ensure that more employees can claim the deduction than would otherwise have been possible under longstanding practice.
A new temporary flat rate method will allow eligible employees to claim a deduction of $2 for each day they worked at home in that period, plus any other days they worked from home in 2020 due to COVID-19 up to a maximum of $400. Under this new method, employees will not have to get Form T2200 or Form T2200S completed and signed by their employer.
RRSP
RRSP contributions directly decrease taxable income. The more RRSP contributions you make, the more your refund would increase. Individuals have until March 1, 2021 to make RRSP contributions for the 2020 tax year.
TFSA
TFSA contributions do not provide any tax savings. However, it is beneficial to make TFSA contributions now if you expect your income to increase down the road, and make RRSP contributions. TFSAs can be withdrawn with no tax penalty, while there are tax implications for withdrawing RRSPs.
Donations
Donations to registered charities have direct tax implications. An individual receives 25.8% of tax savings on the first $200, 46.4% of tax savings on every dollar donated above $200. You can carry forward donations for 6 years, so it might be worth saving up donations for a few years and claiming them all in one year. Donations can be claimed on either spouses’ return if applicable. Therefore, it is most beneficial for one spouse to claim all of the donations made.
Political Contributions
Contributions to a political party have direct tax implications. An individual receives a 75% tax credit on the first $400, so a $400 contribution would only cost you $100. Either spouse can claim these contributions. However, a contribution receipt cannot be split. Therefore, it would be better for a couple to make separate contributions if the contribution is more than $400.
Childcare Expenses
Assuming both spouses are working, the lower-earning spouse can deduct childcare expenses, including daycare and nursery school costs, day camps and day sports schools, and overnight camps.
Manitoba Fitness Credit
Up to $500 can be claimed for sports per child, which results in $54 of savings per child.
Manitoba Arts Credit
Up to $500 can be claimed for sports per child, which results in $54 of savings per child.
Moving Expenses
If a taxpayer has moved at least 40km to be closer to work or school, the taxpayer would be eligible to claim moving-related costs.
Employment Expenses
If the employer has provided the taxpayer a signed T2200 stating that the taxpayer is required to pay employment expenses that are not reimbursed by the employer, or the reimbursement was added to the taxpayer’s income (paystub), then the taxpayer can deduct employment expenses. Common expenses include vehicle, cell phone, and tools.
Manitoba Education Property Tax Credit
$700 tax credit can be claimed if renting in Manitoba. One person can only claim it if accommodations are being shared.
Medical Credits
Tax credit available if medical expenses exceed a threshold based on taxpayer’s net income.
Caregiver Tax Credits
If a taxpayer is caring for or providing support to an individual who is not in a care facility (i.e. living in a house or apartment).
RESP
20% government grant provided on the first $2500 contributed to RESP each year per child.