halifax income tax preparation

Tax Tips & Changes For The 2021 Tax Year

new tax changesContinuing for 2021: if you worked from home in 2021 due to COVID-19, you may be able to claim certain employment expenses such as a portion of your rent, utilities, and internet fees. There is a flat rate and detailed method, and employers may need to fill out a T2200s. The expenses would be calculated on a new form (T777s) and reported under Other employment expenses (line 22900). The flat rate method has had the maximum claim increased from $400 to $500 while the detailed method could possibly have a larger deduction and tax savings depending on the situation.

If you received Covid-19 benefits such as the CERB or CRB (or CESB for students)the benefits are normally taxable and the taxpayer with receive either a T4A or T4E. Note these benefits typically have had very little or no income tax deducted and can result in a tax amount owing at the end of the year. If your total earnings are over $38k you may be required to pay back some or all of the CRB.

If you are self-employed and received Covid-19 benefits for your business such as the CEWS (wage subsidy) or the CERS (rent subsidy) these amounts normally have to be included in your business income or deducted from your expenses. If you received a government loan any portion of the loan that is forgivable would normally be added to your income.

Covid-19 benefits repayment. If you repaid Covid benefits such as CERB, CESB, CRB, CRCB or CRSB in 2021 that you received in 2020 it will be reported either on a T4A or T4E. The taxpayer can claim the deduction in the year the income was received or the year the amount was repaid.

Canada training credit (CTC) (line 45350 of the return). If you meet certain conditions, you will be able to claim a Canada Training Credit, a new refundable tax credit that is available for 2020 and later tax years. The CTC is entered on the S11 and the NS(S11) and reduces your tuition tax credit. Please note tuition is a non-refundable tax credit, unlike the new CTC.

Digital news subscription expenses (line 31350 of the return). For the 2020 to 2024 tax years, you may be able to claim a non-refundable tax credit for expenses you paid in the year for a digital news subscription with a qualified Canadian journalism organization (e.g. an online newspaper subscription). This tax credit is up to $500 and would save the taxpayer $75.

For low income taxpayers Canada Workers Benefit (CWB) has been enhanced. Now single taxpayers can make up to 32k and married taxpayers up to 42k before this refundable benefit is eliminated. This calculation can be found on Schedule 6.

Beginning in 2019 CRA has had a new look for some of their forms and schedules. For instance, Schedule 1 (the federal tax calculation) has been incorporated into the return and no longer exists as a separate schedule. CRA has also eliminated some worksheets and changed the line numbering system to 5-digit numbers.

Starting in 2019 and continuing in 2021 the government has increased CPP contributions. The goal of this is to have CPP replace up to 1/3 of your average work earnings. Under the old rules CPP was aiming to replace only 1/4 of your average work earnings. These enhanced contributions are able to be deducted on your tax return.

The amount of money first time home buyers can take out of their RRSP through the home buyer’s plan (HBP) has been increased from 25k to 35k for withdrawals made after March 19, 2019. The home buyer’s plan is a very popular way to save for a house purchase.

medical expensesMedical Expenses: On a yearly basis CRA expands the list of what you can claim as medical expenses for yourself and your family. The list has been expanded to include cannabis purchased for medical purposes and even costs associated with service animals such as guide dogs. Taxpayers are encouraged to periodically check the CRA website for What are the most common medical expenses you can claim - list. As always medical receipts should be combined and put on the lower income spouse’s return in order to maximise returns.

charity donations and giftsDonations and Gifts: As always donations can be carried forward for up to 5 years and would normally be combined for spouses in order to maximise total returns as it is a 2-step calculation.
The first $200 of donations saves you approximately $50. Anything over $200 will save the taxpayer approximately half of the amount. For example, a $500 donation would save a taxpayer $50 (200 x about 25%) and another $150 (300 x about 50%) for a total tax saving of around $200! Donations to your favourite animal charity, church or medical foundation are a very good way to help both the community and save on income taxes.

For the last several years the Nova Scotia basic personal amount was increased from $8,481 to $11,481 for individuals with a taxable income of $25,000 or less. The $3,000 increase begins to decrease with taxable income above $25,000 and is eliminated for incomes of $75,000 and above. The age, spousal, and eligible dependant amounts have also been increased.

Pensioners should be sure to look at splitting their pension income with their spouse by completing a T1032. This has been one of the biggest tax savings changes made in decades! For Nova Scotians aged 65 and over be sure to be aware of the up to a $1,000 reduction in provincial tax if they can get their income to $23,999.99 or less.

RRSPs: The deadline for purchasing RRSPs is March 1, 2022 if you would like to deduct them on your 2021 income tax return. RRSPs are both a great retirement vehicle and a good way to save for a down payment for a house. Each taxpayer can withdraw up to $35,000 out of their RRSPs (HBP) tax free to purchase a house and then pay it back over the next 15 years. RRSPs can also be used to finance (up to $20,000) going back to university through the Lifelong Learning Plan (LLP).

First-Time Home Buyers should be sure to claim the $5,000 non-refundable tax credit and save $750 on their taxes. This applies to houses, mobile homes and condos.

student education creditsTuition, Education and Textbook Amounts: Beginning in 2017 and continuing in 2021 students can only claim their tuition federally as the claim for education and textbooks has been eliminated federally. However, provincially in NS students can still claim both the tuition and education amounts for both full-time and part-time months. Be sure to check the provincial rules if you’re not filing a NS return as each province has different procedures. For example, Ontario does not allow tuition, or the education amounts to be claimed provincially.

Students should always report their tuition on a S11 and NS(S11) and can still transfer up to $5,000 to a spouse, parent or grandparent. Even if a parent is claiming all of the tuition for themselves it should still be reported on these forms. Students should also be sure to claim any interest paid on student loans.

home tax creditsSale of Principle Residence: Beginning in 2016 and continuing for 2021 taxpayers must report the sale of their personal residence on a Schedule 3 (S3). Failure to do so could result in taxpayers losing their personal residence designation and the resulting tax-free exemption of the capital gain.

teacher tax creditsAmount for Young Children: Taxpayers with children under the age of 6 can claim a NS non-refundable provincial tax credit of $100 per month for each child. This must be claimed on the lower income spouse.

Child Care Expenses: Maximum Child Care Expenses are $8,000 for children under 7 years of age and $5,000 for children aged 7 to 16.

Eligible Educator School Supply Tax Credit: Commencing in 2016 and continuing for 2021 if you are a teacher or hold a diploma or certificate in early childhood education you may be eligible for up to a $1,000 federal tax refundable tax credit for money spent on supplies. A qualifying $1,000 tax credit would now equal a $250 tax saving.

Other Changes:

money bags taxman- The Basic Personal Amount has been increased to $13,808 (as long as your income is less than $151,978).

- The Age Amount for taxpayers 65 years of age and older has been increased to $7,713 with the income threshold above which the amount is reduced increasing to $38,893 at a rate of 15%.

- The Disability amount has been increased to $8,662 and now the form T2201 can be filled out by a nurse practitioner in addition to doctors.

- The EI claw-back threshold has been increased to apply to incomes over $70,375.

- OAS has been increased to $7,486.71 and the OAS claw-back threshold has been increased to apply to incomes over $79,845.

- The maximum Refundable Medical Expense Supplement has been increased to $1,285 and is eligible to taxpayers who have relatively high medical expenses in relation to their income. Please note that medical expenses for couples would normally be claimed by the lower income spouse in order to maximize total returns.

- The CWB which replaced the WITB (working income tax benefit) has been increased to up to $1,395 for single taxpayers and $2,403 for couples. This is a refundable benefit aimed at lower income individuals and families.

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